We are reiterating our Buy rating and $40 price target, but lowering our 2025 and 2026 projections after meeting with JAKKS management and contemplating the near and longer term impact of China tariffs on the company. In the very near term, while only a short period (approximately 30 day) the impact of 100%+ tariffs on China goods created a virtual stop in sales at JAKKS, and with a business model focused on freight on board ("FOB") shipping, necessitated a ramp period thereafter. Further, the current 30% tariff will mean that, yes, there will be a Halloween and Xmas, but it could be more cautious in terms of retailers placing product bets and, will obviously hurt returns for manufacturers and the entire toy supply chain. That said, we believe JAKKS, with the ability to react quickly, strong (and expanding) character franchises, rock solid balance sheet with no debt and a highly secure dividend, expanding international franchise and a low price focus, has the ability to, longer term, win and return quickly to prominence, with the potential to add brands/characters. As such, we remain positive on the JAKKS Pacific business model and reiterate our Buy rating and $40 price target.
