Mattel’s Catalysts for Growth

According to Citi, Mattel has several catalysts for growth, setting it apart from competitor Hasbro.

Citi analyst James Hardiman initiated coverage of toy maker Mattel (ticker: MAT) with a Buy rating and a $26 price target Friday. The stock has seen a 15% increase this year, reaching around $20.50 on Friday.

On the other hand, Hardiman started coverage of Hasbro (HAS) with a Neutral rating and a price target of $62. Hasbro stock has experienced an 8.3% decline in 2023, currently trading just below $56 on Friday morning.

Despite the challenges faced by the toy industry, such as inventory backups, rising inflation, and consumer pessimism, Mattel is poised for a turnaround, according to Hardiman.

“Mattel may have received a spark through the combination of the return of Disney Princess, solid vehicle momentum, and an added lift from the Barbie movie,” he wrote in a research note.

In January 2022, Mattel secured a licensing deal with Walt Disney (DIS), allowing the company to create and sell Disney princess merchandise. This marked a significant win for Mattel as they had previously lost the license to Hasbro back in 2016. Furthermore, the success of the recent Barbie movie has also contributed to Hardiman’s optimism. The film performed exceptionally well at the box office and brought renewed attention to the iconic Mattel doll that was first introduced in 1959.

Potential Surge in Barbie Sales for the Future

There are high expectations for a surge in Barbie sales in the upcoming season and beyond. It is anticipated that this increase will be driven by the success of the recent Barbie movie and potential sequels in the coming years. Mattel, the company behind Barbie, is set to release their third-quarter financial results on October 25. This will provide insight into how the movie’s success, licensing deals, and the state of the consumer market will impact the company’s future.

Caution Advised for Hasbro Investors

Hasbro, on the other hand, may require cautiousness from investors. With a relatively new management team, led by CEO Chris Cocks since February 2022 and CFO Gina Goetter since May, it is recommended to wait on the sidelines. The analyst suggests a neutral rating for now, allowing the management team to establish their footing amidst macro risks and a fickle consumer market, especially as the critical holiday season approaches.

Hasbro’s Transformation into an Entertainment Company

Last year, Hasbro unveiled their “Blueprint 2.0” plan, which aimed to shift the company’s focus from toys to becoming a broader entertainment company. Investors will be keen to hear updates on the progress of this transformation when Hasbro reports its earnings on October 26. Of particular interest is Hasbro’s Wizards of the Coast business, which is considered the crown jewel of their portfolio. The continued success of games like Dungeons and Dragons and Magic the Gathering, along with the rising popularity of the new videogame, Baldur’s Gate 3, have contributed to the company’s positive outlook.