Toy company Mattel has been given an optimistic outlook by Morgan Stanley analyst Megan Alexander, who initiated coverage of the stock with an overweight rating and a price target of $27. This suggests a potential gain of 27.2% over the next year. Despite the uncertain macroeconomic environment, Alexander believes that Mattel is well-positioned to deliver strong returns. She highlights that the stock is trading below historical levels and expects it to re-rate as revisions turn positive and the company proves resilient in a challenging market. Furthermore, Mattel’s strong intellectual property (IP) and the success of the “Barbie” film are expected to contribute to its monetization strategy.
Morgan Stanley’s earnings-per-share estimates for Mattel in 2023 and 2024 are 11% and 8% above consensus, respectively. These estimates are driven by gross margin improvement and the company’s stronger balance sheet, which allows for higher capital returns and accelerated free cash flow. Despite certain headwinds, such as negative unit trends and a potential slowdown in consumer spending, Alexander remains positive about Mattel’s prospects. The stock has already risen by 19% this year, largely due to the success of the “Barbie” film which surpassed $1 billion in global box office sales.
In summary, Mattel is seen as an attractive investment opportunity, with Morgan Stanley initiating coverage on the stock with a positive outlook. The toymaker holds strong potential for price re-rating, driven by positive revisions and resilience in a challenging economic environment. Additionally, the company’s valuable IP and success with the “Barbie” film give it further opportunities for growth and monetization. Despite some potential headwinds, Mattel’s solid financials and strong performance this year position it as a top pick in the consumer industry.