LeapFrog Disappoints in 2013: The Perfect Opportunity to Buy or Run for the Exits?

LeapFrog reported an awful holiday quarter. Is it time for investors to dive in deeper, or get out of the pond?

Feb 18, 2014 at 7:24PM

LeapFrog (NYSE:LF) turned in a terrible holiday quarter, with its 2013 Q4 revenue down 24% year over year, and its gross margins down 5.9%. Is the dominant player in children's electronics suddenly in serious trouble, or does this represent a good opportunity for investors to double down? In the following video, Motley Fool consumer-goods analyst Blake Bos takes investors through LeapFrog's most recent quarter, and paints a picture of the good, the bad, and the ugly happening with the company today.

Blake highlights that a mix of the shortened holiday shopping period and retailer markdowns of the company's LeapPad2 hurt both the company's sales and its margins. New tablet offerings from competitors look to have performed poorly this holiday season, though they occupied a lot of retailer shelf space, which had a negative impact on sales of LeapFrog's products.

However, it's not all bad news. LeapFrog is prepping to launch an all-new product this year in a new category, its products still make up 15 out of the 20 top sellers in the kids electronics category on Amazon.com, and international growth looks strong going forward, with revenue in France up 40% year over year. The company is also debt-free, has a giant cash hoard, and has initiated a share-buyback program. In the video, Blake discusses what to expect from the company in 2014, tells investors why 2015 could be a big year for LeapFrog, and says whether he sees it as a buy, sell, or hold today.

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Blake Bos owns shares of LeapFrog Enterprises. The Motley Fool recommends and owns shares of LeapFrog Enterprises. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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