We are reiterating our Buy rating, projections and price target for JAKKS Pacific with the company announcing 1Q25 (March) results after the close on Wednesday. While we believe our 1Q projections reflected tariff conditions correctly, with April tariff levels increasing on goods from China to 125%, we are entering uncharted territory where, frankly, our current projections probably do not apply. We believe JAKKS Pacific management will have to rebuild their business model, which could entail higher pricing, deeper focus internationally (21% of 2024 sales), lower S,G&A and licensing spend and, longer term, shifting what can be shifted in terms of production from China, which currently accounts for virtually all product manufacturing. As such, we believe the 1Q conference call will be among the most important in the company's post COV-19 history (despite 1Q operationally being the weakest quarter). That said, with no debt, almost $70 million in cash and an untapped senior credit facility, the ability to further reduce potential cash burn by suspending the dividend and strong retailer partnerships, we believe JAKKS has the reserves and ability to weather this current storm and prosper in a new environment. Our Buy rating and $40 price target on JAKK reflect our confidence in CEO Stephen Berman and CFO John Kimble to once again win in a unique time.
