Fundamental analysis
Mattel manufactures toys and other children’s consumer goods. It was founded in 1945 in California, USA. Mattel operates primarily in North America and then in the rest of the world. The main toy brands it owns are Barbie, Disney Princesses and Frozen, Hot Wheels, Monster Trucks, Matchbox, Mario Kart, Thomas & Friends. The company also manufactures and licenses toys and ancillary products for films such as Jurassic Park, Star Wars, Disney films and Pixar. The Company sells its products both directly through its e-store, catalog and its own stores, and through third parties such as department stores, toy retailers, online stores and marketplaces and outlets.
Mattel belongs to the Consumer Goods, Leisure Products industry. Slow, gradual growth is expected in the sector. Year-to-date, the sector is down 7.1%. Estimated results of US companies expect sales growth of approximately up to 26% per year.
Overall, interest in physical toys is declining.
Results
The company seeks to reignite interest in its toys by creating a «Mattelverse». Mattel executives are keen to copy the success of the Marvel movies, which have raised awareness of their action heroes over the past 10 years.
Mattel created the first Barbie movie, which was released a few weeks ago and despite initial skepticism, proved to be a box office hit with very good reviews. More films based on toys like Hot Wheels have already been announced.
However, the positive impact on Barbie toy sales is likely to be in the second half of 2023. The increased sales are not reflected in the current results.
The company’s net profit decreased by USD 27 million to USD 66 million.
The company repurchased USD 16 million of its shares in 2Q, total purchases for 1H2023 are USD 50 million.
Technical analysis
With the release of the Barbie movie, Mattel’s share price has risen by about 25%. However, it has hit a strong resistance at 21.60, which it has not broken so far. This resistance has also repeatedly turned into support and has been very significant over the last two years.
The moving averages are in an uptrend.
The RSI has returned to neutral.
Conclusion
Mattel’s short-term sales are stagnant, and the Barbie movie didn’t change that. But that may change in the medium term trend. Christmas sales are already knocking on the door and the movie is still very popular. This may bring a surge in sales of Barbie dolls. Apparently, the company’s management is betting on it. But the question is whether Mattel will be able to maintain the quality across other announced films. If so, the popularity of other Mattel toys may grow. If not, on the other hand, it may be a flop and sales will drop even further.
The Consumer Goods sector itself is experiencing more of a downturn as consumers see their own finances evolving more negatively. Sales declines are occurring globally. Only a blockbuster that catches the eye can change this.
The interesting information for investors, however, is the continued divestment from equities.