What happened

Shares of Hasbro (NASDAQ:HAS) gained 11.1% last month, according to data provided by S&P Global Market Intelligence. For perspective, the S&P 500 gained 6.44%.

The stock got a boost early in June when Netflix announced the production of a new animated series based on Hasbro's classic game franchise Magic: The Gathering. The Netflix deal, along with the strong results in the first quarter, helped send the stock higher for the month.

A boy lying on the floor using a tablet computer with toy cars scattered around him.


So what

After sluggish sales of toys in recent years, Hasbro has been turning to digital games, in addition to movies based on its franchises, to drive growth.

The news with Netflix comes as Magic: The Gathering has been enjoying a resurgence in popularity lately, helped by more people watching others play the game on game streaming sites. The franchise has recently emerged on the esports scene, where the Magic: The Gathering Mythic Invitational in March generated 2.7 million viewer hours on Amazon.com's Twitch.

Engagement with the franchise has been growing across both digital gaming and analog tabletop, and a new animated series on Netflix will certainly stoke the fire of the game's momentum.

Now what

The investment the company is putting into Magic: The Gathering is a small sample of management's strategy to tap into the growth of the video game industry, including partnering with other top game makers to make licensed toys. Hasbro has partnered with Activision Blizzard and Epic Games to make licensed Nerf blasters based on the popular Overwatch and Fortnite video game franchises.

Hasbro can't rely exclusively on toy sales anymore given consumer trends toward digital experiences. The company is targeting gaming and licensed toys based on popular video game franchises to connect with a young audience that is spending more time playing games these days and watching Twitch content.

Revenue and margins declined in 2018 after the Toys R Us bankruptcy, which disrupted sales growth. Management believes the strength of its gaming business, which grew 20% year over year in the first quarter, will power the company back to profitable growth in 2019.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.