compelling long-term strategy but with one notable missing component: timing.
DA Davidson Linda Bolton Weiser downgrades Mattel's stock rating from Buy to Neutral with a price target slashed from $30 to $24. While Mattel's CEO Margo Georgiadis offered a "thoughtful" strategic plan including a mid- to high-single digit revenue growth and an operating margin above 15 percent, there is no specific timing attached to the plan.
Specifically, the toy maker's strategy to return to growth is five-fold:
- Create connected 360-degree play experiences.
- Aggressively target emerging markets, especially China.
- Fuel the innovation pipeline.
- Improve internal operations.
- Reignite the culture.
Despite an impressive game-plan, Mattel will need up to $350 million of cumulative incremental investments over a multi-year period, the analyst suggested. Doing so also comes at a time when the list of underpeforming brands was expanded to four and there are concerns that even the healthy brands could now slow.
As such, the analyst doubts that Mattel will achieve its bottom half of 2017 estimates and the near-term earnings risk has "heightened."
Finally, as has been expected by other analysts, Mattel slashed its dividend rate by 61 percent to $0.60, which was ahead of the analyst's expectations which were for a reduction of up to 50 percent.
Bottom line, a poor near-term outlook coupled with a lack of timing visibility prompted the analyst to turn incrementally bearish. However, Bolton Weiser's stance could return to positive once the company is able to show tangible results from its initiatives.
At time of publication, shares of Mattel were down 7.45 percent at $20.50.
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