What happened

Shares of games giant Hasbro (HAS -0.38%) soared more than 5% in early trading Tuesday as the company's streamed Investor Day got underway. Then it gave back all those gains.

As of 1:25 p.m. ET, Hasbro stock is back in the red -- down 0.7%.

So what

Much of the presentation was intentionally blacked out for online viewers -- visible only to in-person attendees. Still, what was shown was impressive. Fantasy gaming remains a major focus for Hasbro. 

In addition to discussing a new "The Gathering" convention for Magic fans in Las Vegas, progress on playtesting the company's new "One D&D" edition of Dungeons & Dragons, bundling hard copy and online versions of the "Dragonlance" game, and previewing new Dungeons & Dragons movies and television shows, Hasbro laid out some numbers for the company as a whole.  

In particular, over the next several years Hasbro will target mid-single-digit sales growth on average, culminating in annual sales of $8.5 billion in 2027 -- about a $2 billion improvement in five years. And at the same time as the company is growing sales, it will be cutting costs -- as much as $250 million to $300 million annually by 2025. Helping with this, Hasbro aims to exit any of its franchises that are currently unprofitable and trim unprofitable product lines.  

Now what

Combining cost-cutting with sales growth, Hasbro hopes to grow operating earnings as much as 50% over the next three years -- and faster than the 6.7% long-term earnings growth rate that Wall Street is forecasting for Hasbro. This explains why investors initially bid up the shares this morning.  

As for why the stock later sold off, well, that appears to also be related to sales.

Specifically, to Hasbro's late-breaking announcement that no matter how bright the future appears, in the third quarter of 2022, it's looking at a likely 15% decline in year-over-year sales -- and for the year, only flat to negative sales growth. This surprise announcement swiftly tanked Hasbro stock in the afternoon, and given that Hasbro shares are still selling for a relatively pricey 17-times-earnings valuation, I cannot say investors are wrong to worry. Free cash flow at the company remains weak -- less than half the company's reported $539 million in net income over the last 12 months. And debt levels remain high -- about $3.5 billion more than cash on hand.

Promises of long-term profit improvement notwithstanding, the next couple of months at least -- and possibly longer -- still look rough for Hasbro. The shares aren't an obvious bargain, and until profitability improves, I have no plans to roll the dice on Hasbro stock.