What happened
Shares of Mattel (MAT 1.49%) were getting a boost today after the toy maker got a bullish analyst note from Morgan Stanley this morning.
As a result, Mattel stock was up 4.5% as of 10:51 a.m. ET.
NASDAQ: MAT
Key Data Points
So what
Morgan Stanley initiated coverage on Mattel with an overweight rating, calling the stock a top pick. The analyst expects Wall Street estimates to move higher as the company's turnaround gains traction, and said the company should take share in the $300 billion U.S. retail licensing market, coming off the smash hit Barbie movie. The firm gave Mattel a $27 price target, implying a 27% upside from its closing price last night.
Barbie has topped $1 billion at the global box office and is now among the top 20-grossing films of all time. According to reports, Mattel is set to pocket 5% of box-office revenue from the movie in addition to profits from being a producer, giving the company a windfall of at least $70 million based on recent box office totals.
However, the real opportunity may come from merchandise sales resulting from the movie, such as toys, apparel, and other gear like school supplies.
Now what
We'll learn more about the impact of the Barbie movie when Mattel reports second-quarter earnings in October, but the summer blockbuster has only had a moderate impact on Mattel stock so far.
Shares ramped higher in late June and early July, gaining about 22% in a three-week period and peaking just before the movie debuted and Mattel reported its second-quarter earnings report.
The second-quarter results included a 12% decline in sales and a sharp slide in profits, as toy makers are struggling with difficult comparisons. Sales boomed during the pandemic and have cooled off as discretionary spending has shifted toward services like travel. Meanwhile, inflation has pinched overall consumer spending.
Analyst expectations are modest heading into the third-quarter earnings report, with the consensus calling for 3.2% revenue growth and essentially flat EPS.
That said, if the company can show that Barbie is meaningfully moving the bottom line, the stock could pop again.
