JAKKS Pacific (JAKK) posted second quarter 2010 results, which were way ahead of the Zacks Consensus Estimate. Although key brands like WWE, Hannah Montana and Pokemon continued to weigh on the company’s sales growth, improving consumer spending and cost-cutting initiatives benefited its profitability.
Besides, the company sits on ample cash balance. We remain optimistic about the company’s long-term growth potential with new product launches, possible acquisitions, improved earnings helped by cost-saving measures, resolution of litigation and a strong financial condition to materialize such growth.
Hence, we reiterated an Outperform rating on the stock. Our six-month target price of $18.00 equates to about 14.8x our estimate for 2010. The target price implies an expected total return of 20.8% over that period.