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The Latest On Mattel And Hasbro From Toy Fair 2018

The Latest On Mattel And Hasbro From Toy Fair 2018
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Hasbro, Inc. (NASDAQ: HAS) and Mattel, Inc. (NASDAQ: MAT) had a rough 2017, with the announcement of the closure of about 170 Toys R Us stores. 

But the beleaguered toy stocks could be turning around, according to D.A. Davidson. 

The Rating

D.A. Davidson analyst Linda Bolton Weiser maintained a Neutral rating on Mattel with a $12 price target and a Buy rating on Hasbro with a $126 price target.

The Hasbro Thesis

Hasbro impressed with an “upbeat” analyst meeting guiding for a gross margin increase of 100 basis points and a return to 2016’s 62-percent level, Bolton Weiser said in a Tuesday note. 

Gaming products are expected to be stronger in 2018 than those that drove 2017's 11-percent growth in the segment, the analyst said. 

“There are numerous long-term drivers of operating margin expansion, and with seven major theatrical releases and the new Power Rangers license, we should see an acceleration of sales growth in 2019,” the analyst said. 

Hasbro announced the development of Transformers Digital Centers and Nerf Family Entertainment Centers, as well as its seizure of the Power Rangers license starting in 2019, which Bolton Weiser said would offset the unlikely risk of losing Disney Princesses in 2021.

The Mattel Thesis

Mattel, meanwhile, failed to excite Bolton Weiser. 

“We came away from MAT's analyst meeting and Toy Fair booth with no incremental positive data points,” the analyst said in a Tuesday note, recalling a reduction in gross margin guidance from “well into the 40s” to the “low 40s.”

“Barbie and Hot Wheels are on solid ground and Thomas' switch to airing on Nick Jr. should help, but Fisher-Price and American Girl still need strategies," she said. 

Following that meeting, Bolton Weiser suggested the only positive near-term catalyst was a reclaiming of the Disney Princess license.

The analyst published a more positive reflection on Mattel Wednesday after a smaller investor meeting.

“[We] came away impressed with [CEO Margo] Georgiadis' frank rendition of what happened in 2017, long-term vision of the company as an IP play and determination to execute a successful turnaround,” the analyst said. 

An emphasis on digital content and adjustment in the manufacturing strategy are expected to improve Mattel’s outlook, according to D.A. Davidson. 

Price Action

Mattel shares were up 3.34 percent at $17.02 at the close Wednesday, while Hasbro was up 1.3 percent at $99.07. 

Related Links:

Hasbro Vs. Mattel: In A Tough Retail Environment, Which Toymaker Is Stronger?

Considering Implications For Hasbro And Mattel From The Toys 'R' Us Bankruptcy

Latest Ratings for HAS

Oct 2018ArgusMaintainsBuyBuy
Oct 2018CitigroupMaintainsBuyBuy
Oct 2018BarclaysMaintainsOverweightOverweight

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Earnings Scheduled For February 22, 2018

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