Goldman Sachs picks up coverage on Mattel ( NASDAQ: MAT ) with a Buy rating as it points to the return of Disney Princess, margin expansion and capital returns potential as reasons to be positive on the toy stock.
Analyst Michael Ng and team see opportunity for Mattel ( MAT ) to grow EPS faster than consensus expectations driven by accelerating revenue growth supported by the successful relaunches of Disney Princess and Monster High fashion doll franchises, as well as a strong slate of upcoming supporting content such as the Barbie movie. The completion of the toy company's previously announced cost reduction program is also expected to boost earnings. There is also an opportunity seen for Mattel to materially ramp share repurchases beginning later this year.
On valuation: "At 12.5x NTM EPS, we view valuation as inexpensive relative to both the market and on a historical basis given i) the relatively high degree of visibility into top line and margin execution (in our view), ii) improved balance sheet flexibility and expected capital return capacity, and iii) our outlook for accelerating EPS growth. We see 29% upside to our 12-month, $26 price target based on 14.0x NTM +1Y EPS."
Shares of Mattel ( MAT ) rose 0.83% in premarket trading to $20.63 vs. the 52-week trading range of $16.21 to $26.99.
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Mattel lands buy rating from Goldman Sachs