Bear of the Day: JAKKS Pacific (JAKK)

JAKKS Pacific produces, sells, and distributes toys and related products. A multi-line, multi-brand company, JAKKS Pacific also sells electronics, kids indoor and outdoor furniture, and sporting goods. Its products include action figures, toy vehicles, dolls, inflatable tents, wagons, costumes, and other child-related accessories.The company sells its products through both in-house and independent sales teams to mass-market retail chains, grocery stores, toy specialty stores, and wholesalers. JAKKS was incorporated in 1995 and is headquartered in Santa Monica, California.The toy company faces several notable headwinds. Over 75% of its business operates on a Freight-On-Board (FOB) basis, with products sold either directly at the factory or through ports in China. Revenues have been under pressure in recent quarters due to lower orders in key categories. Tariff uncertainty, increased expenses, and depleting liquidity remain top concerns.The Zacks RundownA Zacks Rank #5 (Strong Sell) stock, JAKKS is part of the Zacks Toys – Games – Hobbies industry, which currently ranks in the bottom 2% out of approximately 250 industries. Because this industry is ranked in the bottom half of all Zacks Ranked Industries, we expect it to underperform the market over the next 3 to 6 months.Stocks in the bottom tiers of industries can often be intriguing short candidates. While individual stocks have the ability to outperform even when they’re part of a lagging industry, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.JAKK stock has been severely underperforming the market off the April lows. The stock has failed to show any real momentum and represents a compelling short opportunity as we head further into 2025.Recent Earnings Misses and Deteriorating OutlookJAKKS Pacific JAKK has fallen short of earnings estimates in four of the past six quarters. The company posted a trailing four-quarter average earnings miss of -283%. Consistently falling short of earnings estimates is a recipe for underperformance, and JAKK is no exception.The kids’ accessories company has been on the receiving end of negative earnings estimate revisions as of late. Looking at the full year, analysts have slashed estimates by a whopping -38.26% in the past 60 days. The 2025 Zacks Consensus EPS Estimate is now $2.34 per share, reflecting negative growth of -38% relative to last year.Image Source: Zacks Investment ResearchFalling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.Let’s Get TechnicalAs we can see below, JAKK stock isn’t showing much in terms of a clear trend. Notice how the stock remains below both its 50-day (blue line) and 200-day (red line) moving averages. It’s important to point out that the 200-day average remains downward-sloping:Image Source: StockChartsJAKK stock has also experienced what is known as a “death cross,” whereby the stock’s 50-day moving average crosses below its 200-day moving average. Shares would have to make an outsized move to the upside and show increasing earnings estimate revisions to warrant taking any long positions. The stock has fallen more than 40% since February, all while the general market returned to new heights.Final ThoughtsA deteriorating fundamental and technical backdrop show that this stock is not set to hit new highs anytime soon. The fact that JAKKS Pacific is included in a weak industry group simply adds to the growing list of concerns.A history of earnings misses will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.JAKK shares continue to experience substantial volatility and have widely underperformed the market lately. With negative earnings estimate revisions continuing to pile up, this stock should be avoided as there are plenty of better alternatives in the current market environment.Zacks' Research Chief Picks Stock Most Likely to "At Least Double"Our experts have revealed their Top 5 recommendations with money-doubling potential – and Director of Research Sheraz Mian believes one is superior to the others. Of course, all our picks aren’t winners but this one could far surpass earlier recommendations like Hims & Hers Health, which shot up +209%.See Our Top Stock to Double (Plus 4 Runners Up) >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report JAKKS Pacific, Inc. (JAKK): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks