Mattel's Stock Is Down 45% In Two Years, But Here's Why Buying The Dip Makes Sense

• Shares of Mattel, Inc. MAT have lost 45% since its December 2013 highs of $48 and are lower by around 12% over the past year.
• Gerrick Johnson of BMO Capital Markets upgraded Mattel's stock to Outperform from Market Perform with a price target boosted to $33 from a previous $25.
• The analyst cited the company is entering ‘early stages' of a ‘multi-year positive run.'

Shares of Mattel have lost 12% over the past year alone and are lower by 45% since its December 2013 highs. Gerrick Johnson of BMO Capital Markets turned bullish on Mattel's stock and upgraded the issue to Outperform from Market Perform with a price target raised to $33 from a previous $25. According to the analyst, the company is in the "early stages" of a "multi-year positive run" given a new management team that is focused on: creativity, speed to market, and new collaborative partnerships. A $33 price target implies a 16.5x multiple on the analyst's 2017 earnings per share estimate of $2.00. The multiple is in-line with the company's historical average and implies a 5.6% dividend yield. Currently, the stock is trading at a 13x 2017 earnings per share multiple and 6.0% dividend yield. Related Link: Here's How Disney's ‘Star Wars: The Force Awakens' Will Also Benefit Hasbro "We anticipate a significantly better product line driving growth in sales and earnings in 2016 and beyond," Johnson wrote. "The company's operating structure remains sound, and the toy industry is showing some of the best strength we have seen in more than 20 years. Johnson continued that "key lines" such as Hot Wheels, Barbie, Fisher-Price, and Thomas are "performing well" so far this holiday season. The strong performance should also provide a "base of support" heading into 2016. The analyst also pointed out that while the Street's concerns over the company's 6% dividend yield is "valid," it is nevertheless "safe" should the company perform well over the coming year. In addition, there is "limited visibility" into the company's 2016 as the first opportunity to view the company's products will be the NY Toy Fair on February 2015. Finally, Johnson acknowledged that if Mattel's product line "disappoints" there is risk to his price target.