We are reiterating our Buy rating, but lowering our projections for 2025 and 2026 and reducing our JAKK price target to $30 (from $40), or 9.8X our new 2026 EPS, after meeting with JAKKS Pacific management. While we remain positive on the rising international segment, the ability of management to leverage their leading market position and the potential for new licenses/acquisitions (particularly in 2026), the near-term reverberations from the China tariffs in 1H25 have already begun to show in the lead up to Halloween and Xmas. Further, we believe JAKKS management is, rightfully, remaining cautious in terms of inventory risk, which, combined with the company's focus on the Freight On Board ("FOB") shipping model, will limit potential upside if the Xmas season is later (and stronger) than usual. When combined with a valuation below virtually all other public toy companies, we see virtually no reason to be aggressive in any projected financial metric. We fully believe in the JAKKS business model, and their ability to survive in tough conditions and thrive when normalcy returns; as such, we are reiterating our Buy rating, but bowing to the near-term inevitable and lowering our price target.
