DA Davidson has downgraded Hasbro, Inc. (NASDAQ: HAS) to a Neutral rating (From Buy) and cut their 12-month price target on the toymaker to $53.00 (From $60.00).

According to analysts at DA Davidson, indications point towards an uncertain path ahead for the toy industry as growth stagnates. Additionally, Wizards and Digital Gaming are facing a tough comparison in 2024 owing to the impact of Baldur's Gate 3.

“We estimate 2023 could be the second year that free cash flow does not cover dividends of ~$400M.” Wrote DA Davidson analysts in a note.

Hasbro recently confirmed that staff cuts announced in December 2023 were planned and not a reaction to 4Q performance, suggesting management may have intentionally aimed low with their guidance for 4Q23 and does not expect a miss.

However, CEO Chris Cocks mentioned in internal memos that the difficulties faced in 2023 might continue into 2024 as the industry faces a possible post-COVID correction.

Hasbro’s tone has prompted DA Davidson to adjust predictions for the segment in 2024.

DA Davidson now expect only a 1% increase in segment sales instead of the previously projected 3%, affecting the overall company's organic sales, now estimated to grow by 2% instead of 3%. This adjustment led to a reduced 2024 EPS estimate of $3.40, below the previous lowest street estimate of $3.46.

Also, their forecast for Hasbro's 2024 EBITDA was lowered to $994 million, while the consensus is at $1,116 million.

Shares of HAS are down 1.65% in early trading Tuesday morning.

By Michael Elkins | [email protected]