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Analyst: Mattel's Fundamentals Don't Warrant Its Recent Run

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Analyst: Mattel's Fundamentals Don't Warrant Its Recent Run

Mattel, Inc. (NASDAQ: MAT) was downgraded Thursday from Neutral to Underperform by D.A. Davidson analyst Linda Weiser. Weiser maintained her $12 price target on the stock.

The Thesis

Mattel shares closed Wednesday 29.5 percent above the April 20 low of $12.96, compared to the S&P 500’s 1 percent gain over the same period.

The company’s fundamentals haven't improved though, Weiser asserts. On the contrary, the analyst cut her sales and earnings projections below the Street’s estimates.

Weiser expects Mattel to face a hard second quarter stemming from the "Cars 3" merchandise channel fill and disruptions caused by the liquidation of Toys 'R' Us.

Plastic resin spot prices are also up 2 percent since Mattel reported Q1 earnings, suggesting margins will continue to be squeezed. Prices are up 30 percent since late-May 2017.

Several retailers have announced to increase shelf space for toys, easing the impact of Toys 'R' Us, but most plans will likely not see execution until late in the year. Most notably, Party City Holdco Inc (NYSE: PRTY) will open 50 toy pop-up stores for the holiday season.

Mattel will be counting on distribution channels opening up before then.

“Mattel's business is highly seasonal and its operating performance relies heavily on sales during the brief holiday season,” said Weiser in the note.

Price Action

Mattel shares were trading 2.1 percent lower to $16.42 at time of publication.

Related Links:

Party City Pop-Up Toy Stores Could Help Toymakers Stung By Toys 'R' Us Closures

What The Toys 'R' Us US Liquidation Means For Toy Makers

Latest Ratings for MAT

DateFirmActionFromTo
Oct 2019MaintainsHold
Sep 2019MaintainsNeutral
Apr 2019MaintainsNeutral

View More Analyst Ratings for MAT
View the Latest Analyst Ratings

Posted-In: D.A. Davidson Linda Weiser Toys R USAnalyst Color Downgrades Analyst Ratings Best of Benzinga

 

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