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Shares of Mattel (NASDAQ: MAT), a children’s and family entertainment company, have surged over 17% in the last month due to the optimism surrounding the release of the Barbie movie. Mattel designs and manufactures toys and consumer products, including brands such as Barbie, American Girl, Disney Princess, and Frozen.
Valued at a market cap of $7.5 billion, Mattel stock has returned 36% in the last five years. However, it has trailed the broader markets significantly in the last decade, falling nearly 50% since July 2013. Let’s see if it makes sense to invest in MAT stock right now.
Barbie grosses $155 million in its opening weekend
According to a report from Variety, the Barbie movie, a fantasy comedy, smashed expectations to collect $155 million in its opening weekend. If we include international box office numbers, Barbie raked in a total of $337 million, a record in the post-pandemic era.
Barbie has been an extremely popular doll among kids around the world. It has captured the customer's imagination for several decades by introducing fun accessories in clothing, a hair salon, and even the Dreamhouse. A few months back, Mattel also launched a Barbie with Down syndrome to make it more inclusive.
Mattel launched its film division five years back to benefit from its broad portfolio of intellectual properties (IPs) such as Barbie, Hot Wheels, and American Girl dolls. This move will help the company unlock another significant revenue stream allowing Mattel to pivot from just manufacturing toys, making it a comprehensive entertainment entity. The monetization of its IPs will enable Mattel to create a flywheel effect and bring in millions of dollars in additional toy sales.
An article from the New Yorker stated Mattel has 45 movies in different stages of development as it aims to monetize further IPs, including He-Man, Hot Wheels, and even the card game UNO.
A look at Mattel's stock price and its financials
Mattel increased sales from $4.5 billion in 2019 to $5.43 billion in 2022. But toy companies globally have struggled in recent months as the pandemic boom faded and consumer spending shifted away from at-home entertainment options.
In Q1 of 2023, Mattel’s sales fell by 22%. It reported an operating loss of $87 million, compared to a loss of $10 million in the year-ago period. It expects sales to be flat at $5.4 billion with adjusted earnings between $1.10 and $1.20 per share. In 2022, Mattel’s adjusted earnings stood at $1.25 per share.
Priced at 18 times forward earnings, Mattel stock is not too cheap. However, it wrestled with consistent losses before COVID-19, and the business is now showing signs of recovery.
The final takeaway
Mattel struggled for several years due to a weak balance sheet, tepid retail sales and the bankruptcy of Toys R Us in 2017. Its revenue and share prices have experienced a free fall in the lastten0 years, burning investor wealth at an alarming rate.
But given the challenges, Mattel stock is well positioned to stage a comeback, especially if its movie-making strategy pays off.
Analysts tracking MAT stock expect shares to gain another 8% in the next 12 months. Expect Mattel stock to gain significant momentum if the Barbie movie success translates into additional doll sales.