Hasbro’s stock prices took a dive after Bank of America analysts found it was overprinting and overpricing Magic: The Gathering cards. Bank of America claimed Hasbro was ruining the long-term value of Magic: The Gathering with its overly-aggressive business model.Magic: The Gathering is produced by Wizards of the Coast, a subsidiary of Hasbro, one of the largest toy and entertainment companies on the market. In addition to the collectible card game, Wizards of the Coast also produces Dungeons and Dragons, the popular tabletop role playing game.The toy company giant’s stock dipped 5.2% after having its status downgraded twice, from “buy” to “underperform.” This downgrade came after Bank of America conducted a deep dive into the Magic: The Gathering business model and found it was sabotaging its own value. By printing too many cards too quickly and pricing them too aggressively, its market threatens to become oversaturated, with too much supply and not enough demand.
Stock market analysts use a three-tier system when rating stocks:
- “Buy” or “outperform” means a stock is expected to rise in price, meaning investors should buy shares.
- “Hold” or “market perform” indicates a stock price will probably not rise or fall, indicating investors should not buy or sell shares.
- “Sell” or “underperform” is an estimation that a stock price is about to tank, suggesting investors should sell quickly.
Hasbro’s double-downgrade from the highest to the lowest tier of stock value means many investors may pull out from the company, causing many long-term problems in the process. If it is unable to bounce its market back, it could impact the production of other Hasbro and Wizards of the Coast products.
Many Magic: The Gathering fans have been warning Wizards of the Coast of this exact thing for years now. In the past, it would be typical for Magic: The Gathering to release between three and five products in a given year. However, in 2022 alone, Magic: The Gathering has released over a dozen physical products. Though not all of them are full sets, many include unique new cards or rare reprints that are prized by many collectors. To make matters worse, the prices of these Magic: The Gathering products have been steadily rising over the years.
This has caused financial burnout with many Magic: The Gathering fans, who simply cannot keep up with the rate Wizards of the Coast is releasing products. These players have been begging Magic: The Gathering to slow down for years. Now that Bank of America has done the same–with a major monetary penalty to go with it–perhaps Magic: The Gathering players and their wallets might get some relief over the next few years.
Source: CNBC