Toy giant Mattel is riding its blockbuster summer movie "Barbie" into the holiday shopping season with Mattel stock nearing a buy point ahead of earnings later this month.
While at least one analyst sees better top-line performance from rival Hasbro, Wall Street now expects the toy maker to take a bigger slice of the $300 billion retail licensing market thanks to the "Barbie" movie. That market includes all intellectual property related to the iconic doll, such as "Barbie" backpacks, clothes and accessories.
And the company sees movie-related toys and products generating more than $125 million in gross billings for 2023.
Blended operating income margin should exceed 60%, Mattel Chief Financial Officer Anthony DiSilvestro said during a Goldman Sachs conference on Sept. 7. Mattel forecasts benefits to roll into 2024 "and beyond." He echoed sentiment from Chief Executive Ynon Kriez in July.
"The Barbie movie is a showcase for the cultural resonance of our IP," Kreiz said in Mattel's Q2 earnings release. "This also speaks to the potential of Mattel Films and the significant progress of our strategy to capture the full value of our IP."
Betting Big On Barbie Movie
"Barbie" was an immediate box office hit, grossing $162 million its opening weekend following its July 21 release, according to Box Office Mojo. The film raked in a total $1.43 billion worldwide during its 10-week theater run.
So now the company is betting big on its "Barbie" movie success and hoping to replicate it with other intellectual properties that it owns. Mattel has 14 movies and television series in its pipeline for its toy franchises including Polly Pocket, Barney, Rock 'Em Sock 'Em Robots and Hot Wheels, among others.
For third-quarter results at the end of the month, analysts expect Mattel to report 2.4% earnings growth to 84 cents per share on 4.9% revenue growth to $1.84 billion.
Morgan Stanley initiated coverage of Mattel stock early Tuesday. The brokerage gave it an overweight rating and a $27 price target, naming it a top pick. The brokerage also sees upside to Wall Street estimates as Mattel sales growth stabilizes. It also sees gross margins inflecting and improved free cash flow generation supporting capital returns.
Hasbro Goes Digital
One caveat: Morgan Stanley also expects improvement from rival Hasbro. The company's management plans to simplify the business, cut cost and invest in innovation to drive top-line growth. Morgan Stanley believes better visibility into Hasbro's 2024 profitability improvements could soothe investor sentiment and drive multiple expansion.
Morgan Stanley initiated coverage of HAS stock with an overweight rating and $84 price target early Wednesday.
Meanwhile, BofA predicts Hasbro should benefit from the release of the games Monopoly Go and Baldur's Gate 3 in the spring and summer, respectively.
The mobile game and Dungeons & Dragons video game both earn royalty revenue for Hasbro and are doing "exceptionally well," analyst Jason Haas wrote in a recent note. If Monopoly Go generates $500 million of revenue in its first year, BofA estimates it will translate to $60 million of revenue for Hasbro. It sees it contributing 33 cents a share to earnings, largely in 2024.
Baldur's Gate 3 sold 2.5 million units during presale, Bloomberg reported. And it hit 5.2 million units sold on the PC Steam platform about two weeks after its Aug. 3 release. Sales figures for PlayStation are not available following the Labor Day weekend release. Baldur's Gate 3 will release for Xbox "soon."
Investors don't fully appreciate Hasbro's potential to generate high-margin licensing revenue from its strong IP library, Hass wrote. He raised his price target on HAS stock to $90 from $85 and maintained a buy rating on shares.
Mattel Stock
Mattel stock is trading in a flat base with a 22.64 buy point, matching its high from July 27. Shares bounced above their 50-day moving average on Sept. 27 and reclaimed their key technical lines. MAT stock has eased the past few days to trade just above its 21-day exponential line and 10-day moving average.
The current buy zone, which stretches 5% beyond the buy point, extends to 23.77. Mattel stock eased to 21.33 Tuesday. MAT shares rallied 19.6% year-to-date.
Meanwhile, HAS stock faded about 2% Tuesday. Shares have steadily fallen from their 2023 peak of 73.58 on Sept. 9.
Hasbro stock slipped below ifs 50-day line on Sept. 25 after falling below its 10-day and 21-day lines earlier in the month. Shares rose 3.3% year-to-date.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
