Goldman Sachs boosted its rating on Mattel ( NASDAQ: MAT ) to Buy from Neutral on what it sees as better earnings visibility ahead from content, new product innovation, and pricing.
Analyst Michael Ng and team said that MAT stands out in benefiting from several company specific demand drivers in TV & film content releases, the returning Disney Princess toy license in 2023, and new product innovation in a tough macro backdrop.
Of note, Barbie toy sales likely are seen benefiting from the upcoming theatrical release of Barbie, which has a strong brand perception with parents whom the purchase decision lies with.
"Further, MAT’s fixed cost leverage, mid-2021 and upcoming mid-2022 price increases, and peaking cost inflation should be supportive of margins over the next 2 years. We gain confidence in MAT’s 2022 guidance for 8-10% constant currency revenue growth and EPS of $1.42-$1.48 as well as its 2023 goals of HSD constant currency revenue growth, EBIT margins of 16-17%, and EPS >$1.90."
Goldman Sachs' 12-month price target on MAT of $31 works out to 16X the near-term EPS, which is seen as relatively consistent with the recent and historical multiple.
Shares of Mattel ( MAT ) jumped 2.46% in premarket action to $23.32 vs. the 52-week trading range of $17.95 to $26.99.
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Mattel gains after Goldman Sachs turns bullish on upside from content releases