We came across a bullish thesis on JAKKS Pacific, Inc. (JAKK) on Substack by Inflexio Research. In this article, we will summarize the bulls’ thesis on JAKK. JAKKS Pacific, Inc. (JAKK)’s share was trading at $18.17 as of May 5th. JAKK’s trailing and forward P/E were 4.33 and 9.08 respectively according to Yahoo Finance.
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Jakks Pacific delivered a blowout Q1 2025 performance, far surpassing expectations and reaffirming the strength of its recent transformation. Revenue surged 26% year-over-year to $133.3 million, while gross margins expanded dramatically to 34.4%, up 1,100 basis points. EBITDA turned positive at $0.4 million, a significant improvement from -$17.2 million in the prior year and far ahead of the estimated -$14.2 million. This marks only the second time in 15 years that Jakks has generated positive EBITDA in a first quarter, underscoring the company’s operational momentum. The cash balance remains robust at $60 million, or approximately $5.40 per share, and the dividend is intact, now yielding an attractive 5.34%. Despite these impressive financial results, the market’s focus quickly shifted to broader macro concerns following retaliatory tariffs on China. With tariff rates on toys now potentially rising to a staggering 145%, the industry faces a disadvantage compared to other consumer goods. This could prompt retailers to allocate shelf space to alternative product categories, though there’s speculation that such extreme tariffs are unsustainable and may be reduced in the near term.
In the meantime, Jakks is unlikely to be materially impacted by the tariffs, given the seasonal nature of the toy business and the current lull in demand until the September ramp-up. However, if tariffs persist through August, there is a meaningful risk that 2025 becomes a lost year for the company. While Rosen, Jakks’ largest shareholder, may offer limited U.S. manufacturing capabilities, these would not be sufficient to offset near-term disruptions. Relocating production to alternative regions would likely take 18–24 months, presenting a timing mismatch that limits immediate solutions. Nonetheless, Jakks’ fortress-like balance sheet and a highly favorable three-year setup offer investors a cushion against short-term volatility. The company is well-positioned to ride out tariff noise, and the long-term thesis remains intact. Jakks is clearly executing operationally, and should geopolitical pressures subside, the current stock price could represent an undervalued entry point.
