- DA Davidson analyst Linda Bolton Weiser reiterated a Buy rating on the shares of Mattel Inc MAT but lowered the price target from $45 to $31.
- Mattel slightly missed the consensus 3Q22 sales estimate but beat the Street's operating profit by 2%, said the analyst.
- The analyst added that the company maintained 2022 sales guidance of +8%-10%, ex. FX, but lowered EPS by 6% at the mid-point, as the Q4 gross margin will be impacted by promotions to move inventory.
- POS in North America in 3Q22 was down mid-single digits, worse than the overall toy industry because Mattel is under-indexed in currently higher growth segments like plush and trading cards.
- The toy maker expects high advertising & promotional spending in 4Q22 to drive an acceleration in POS late in the quarter, as consumers are expected to return to traditional buying very close to Christmas versus much earlier buying in 2021, the analyst noted.
- The toy industry is highly competitive with low entry barriers, making it difficult for the company to achieve, maintain, or build upon its successful brands and products.
- Another challenge for the company due to high levels of competition is securing, maintaining, and renewing licenses for popular entertainment products, said the analyst.
- Mattel's business is highly seasonal, and its operating performance relies heavily on sales during the brief holiday season.
- The analyst specified that any disruptions to the company's results during this time, such as the underproduction of popular toys and the overproduction of less popular toys with consumers, would negatively impact sales.
- The analyst also noted that consumer interests in the toy industry are rapidly changing, which makes it challenging to design toys that will be popular with children and families.
- Price Action: MAT shares are trading higher by 0.76% at $19.92 on the last check Wednesday.
- Photo Via Company
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