Mattel: A Top Pick for Licensing Success

In a recent report on the leisure sector, Morgan Stanley analysts led by Megan Alexander have initiated coverage of Mattel stock (ticker: MAT). They have assigned an Overweight rating to the stock and set a price target of $27, highlighting it as a “top pick”. This endorsement is expected to propel the toymaker’s stock higher.

At present, Mattel stock has already shown promising growth, surging by 4.2% to reach $22.12 in Wednesday trading. While the analysts acknowledge that consumer spending may decline as student-loan repayments resume, leading to a drag on discretionary spending in the coming year, they believe that within the leisure sector, there are opportunities for growth. The valuations of several companies appear reasonable, if not cheap.

To identify viable investment options, Morgan Stanley utilized a comprehensive framework comprising factors such as stability, pricing, and industry trends. Through this analysis, they have recommended initiating coverage on shares of Hasbro (HAS), Xponential Fitness (XPOF), and Planet Fitness (PLNT) with an Overweight rating. These companies are projected to reach price targets of $84, $27, and $62 respectively.

On the other hand, the analysts have also started coverage on Topgolf Callaway Brands (MODG), a golf-equipment maker, and Traeger (COOK), a grill-maker. They have assigned an Underweight rating to these companies, with respective price targets of $12.50 and $3.

In conclusion, Mattel emerges as a favored pick for investors looking to benefit from licensing efforts. Backed by Morgan Stanley’s positive outlook and strong ratings, the future appears bright for this renowned toymaker.

Morgan Stanley’s Outlook on Toy and Gaming Industry

Morgan Stanley, a leading financial institution, has highlighted its preference for the toys/gaming and fitness sectors due to their relative stability. However, the company also expressed caution regarding larger ticket items such as boats and grills, attributing it to the delayed impact of higher interest rates on consumer demand.

Analysts are optimistic about the financial performance of Mattel, a prominent toy manufacturer. They expect an improvement in gross margin as input costs decline, inventory balance is restored, cost-saving measures are implemented, and the company benefits from lucrative licensing efforts. In particular, the upcoming Barbie movie is expected to be highly accretive. Despite trading at a lower price/earnings ratio of 15 times, analysts anticipate a rebound in Mattel’s stock, with potential positive developments in the third quarter earnings report.

Meanwhile, Hasbro’s stock experienced a modest 0.8% increase, reaching $65.78 on Wednesday.

The analysts also have positive expectations for Hasbro’s future. They believe that the implementation of the new management team’s strategic plan, aimed at streamlining operations, reducing costs, fostering innovation, and driving core revenue growth, will lead to upward revisions. Additionally, the impending sale of the entertainment business is expected to simplify the company’s narrative, enhance visibility of free cash flow (FCF), and enable management to refocus on core operations.

In summary, Morgan Stanley’s analysis and projections outline a promising outlook for both Mattel and Hasbro in the toy and gaming industry.