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Jefferies: The Bearish Case For Mattel's Stock No Longer Applies

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Jefferies: The Bearish Case For Mattel's Stock No Longer Applies

Mattel, Inc. (NASDAQ: MAT) isn't out of the woods just yet, as there are multiple risks management needs to address. But the case for being bearish on the stock has come to an end as shares are trading near its fair value, according to Jefferies.

The Analyst

Jefferies' Stephanie Wissink upgraded Mattel's stock from Underperform to Hold with a price target lifted from $12 to $13.

The Thesis

Mattel continues faces multiple near-term risks, Wissink said in a note. These include the Toys "R" Us bankruptcy and store liquidation, ongoing competition and cash constraints such as $500 million of debt coming due in the first half of 2019.

Mattel's near-term risks, however, are "largely known" and priced in to Mattel's stock at current price. Under a base case scenario, Wissink said the company's IP value alone is worth $8 to $10 per share, plus $1 to $1.50 per share in property value. Subtracting net debt per share yields a core value (excluding licenses) of $10 to $12 and a fair value of around $13 per share.

Mattel's first quarter earnings report on April 19 remains a big question mark with a wide variety of potential outcomes, the analyst said. As such, it's unclear how the stock will react, but at around $13 per share, the downside is limited at current levels.

Price Action

Shares of Mattel were trading higher by 5 percent at $14.19 Wednesday afternoon.

Related Links:

Buy Hasbro As Toys 'R' Us Liquidates, Says KeyBanc Analyst

Not Just A Toy Story: Market Winners And Losers From The Toys 'R' Us Liquidation

Latest Ratings for MAT

DateFirmActionFromTo
Feb 2021KeyBancMaintainsOverweight
Dec 2020CitigroupInitiates Coverage OnNeutral
Nov 2020KeyBancMaintainsOverweight

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