Toy Wars: Goldman Prefers Hasbro Over Mattel

Shares of Hasbro, Inc. HAS hit a new all-time high of $98.76 on Friday while rival Mattel, Inc. MAT has been trading at its lowest levels in a year after a poor earnings report.

Analysts at Goldman Sachs initiated coverage of Hasbro with a Buy rating and $110 price target.

Analyst Michael Ng noted Hasbro could demonstrate upside to consensus estimates given its strong portfolio of entertainment-backed toys. Specifically, the analyst cited the "unprecedented amount" of movies including seven Marvel films in 2018, three Transformers films through 2019 and two Star War films. Moreover, momentum in Walt Disney Co DIS's Princess division should drive growth in sales of toys to girls.

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Ng also initiated coverage of Mattel with a Neutral rating and $27 price target.

The analyst's neutral stance is based on the fact that Mattel is undergoing a turnaround at its core brands, including Barbie, American Girl and Fisher-Price. While the turnaround initiatives should spur top-line and margin growth, consensus estimates are already factoring in a "meaningful recovery."

Ng also cited increased execution risk, especially in the dolls division which faces heightened competition from Disney Princess.

The analyst's rating marks the first time in three years the firm didn't slap a bullish rating on Mattel's stock to start the year, although a mid-year upgrade to Buy was seen in 2015.