We are reiterating our Buy rating and $40 price target on JAKKS Pacific after the company demonstrated the overall strength of their business model and management's ability to "control what they can control" with a highly impressive 1Q25. That said, we are reducing our 2025 and 2026 projections to reflect the near-term material uncertainty from the imposition of over 100% tariffs on China goods from April onward. While we believe JAKKS is well positioned, with strong trade, licensee and retailer relationships, a focus on lower priced goods, the ability to shift some production from China and to increase the level of international revenue, to weather the current storm and drive potential upside, we believe the current level of uncertainty will be a drag, which will begin to abate in 4Q25 and into 2026. That said, any shift in the tariff regime, new licenses (or potential acquisitions) could be a material upside catalyst. Further, with no debt and with almost $60 million in cash, JAKKS Pacific is financially well positioned to be a key winner in these uncertain times. As such, and with management confident enough to maintain the current $0.25 quarterly dividend (annual dividend yield of over 5%) we believe JAKK, trading at 5.4X our lowered 2026 EPS, represents an impressive risk/reward, and we are reiterating our Buy rating and $40 price target.
