Is Mattel's Q4 Miss The End Of This Toy Story?

Shares of Mattel, Inc. MAT, known for its Barbie brand of toys, plunged more than 15 percent after a “surprise” fourth-quarter EPS miss due to the late arrival of Christmas retail selling season.

Investors were taken by surprise with the toy maker announcing the year’s most important quarter ahead of schedule with a sizeable miss. In fact, the bleeding won’t stop here as Mattel, which was set to release results on February 1, said higher inventories at the end of the fourth quarter would hurt current-quarter revenues too.

But, a Wall Street analyst still sees light at the end of the tunnel and recommends investors to take weakness in shares as a buying opportunity.

Not The End To This Toy Story

BMO’s Gerrick Johnson still rates Mattel shares Outperform, saying the new products and core brands are gaining traction, while being optimistic about the new management changes.

“While the miss is a setback, and our outlook warrants an increased level of caution, we do not think it is, by any means, an end to what has been a highly encouraging turnaround story,” Johnson wrote in a note.

That said, the analyst noted that bears may rekindle questions regarding the sustainability of the $1.52 dividend (5.4 percent yield). In addition, uncertainty around potential Trump tariffs and taxes could further hit the shares.

But, Johnson still sees Mattel as a core holding for a two- to four-year time period, given the recent hiring of Google GOOG GOOGL) exec Margaret Georgiadis and the product still being executed by chief operations officer Richard Dickson.

“[W]e feel the dividend is safe, as Mattel has proven in the past it can still generate cash in good times and bad. We suggest collecting the 5 percent yield and waiting it out; we don't think the wait will be long,” Johnson added.

At last check, shares of Mattel plunged 15.11 percent to $26.67, closer to its 52-week low of $26.11. Johnson trimmed his price target by $4 to $36.