She’s less than a foot tall but worth over a billion dollars at the box office alone. For Mattel (MAT), the “Barbie Boost” is off and running.
After its July release, the Greta Gerwig-directed Barbie film quickly rocketed to the highest-grossing film of the year. It’s earned over $1.4 billion worldwide (so far), putting it among the top 20 highest-grossing movies of all time alongside superhero epics like The Avengers and timeless classics like Titanic.
Mattel’s vintage 1959 toy is now Hollywood royalty.
The result: Barbie sales jumped 16% in the third quarter, while overall revenue for the toymaker rose 9% to $1.92 billion.
This performance exceeded Wall Street’s expectations, with earnings per share at $1.08 (adjusted), compared to the expected 86 cents.
Our consumer insights machine saw this jump in consumer demand coming from a mile away. Just check out the Barbie brand buzz chart below, which captured a 734% year-over-year surge:
Last week’s earnings weren’t enough to impress analysts, though.
CEO Ynon Kreiz noted a year-to-date decline in overall toy industry sales. This observation, coupled with Mattel’s cautious stance towards the upcoming holiday season and broader industry challenges, led to a 16% decline in MAT shares between the market close on Wednesday and the opening bell on Thursday.
Analysts highlighted this “near-term cautiousness” and broader industry weakness as key factors affecting investor sentiment.
But we think Wall Street got it dead wrong.
Here are three big reasons why we’re bullish on Mattel ahead of the holiday season…
No. 1: Broader Strategy Impact
The success of the Barbie movie marks Mattel’s first major move in leveraging its intellectual property to create other potential blockbusters.
This strategy not only boosted Barbie sales but also positively influenced other Mattel brands, like Hot Wheels, which saw a 22% sales increase.
The company has a new Hot Wheels: Let’s Race animated series in the works at Netflix (NFLX), which could act as another sales booster heading into its Spring 2024 launch.
And a full-length Hot Wheels film is already in the works from Warner Bros – due in 2025.
With a handful of other classic brands under its umbrella, the sky is the limit for Mattel to turn the lever in a similar fashion across its portfolio.
No. 2: Barbie Fever Isn’t Over Yet
In fact, it may just be heating up.
After earnings, Mattel launched its Barbie Signature Ted Lasso Collection.
The $50 Lasso figurine is already sold out on Mattel’s site:
…And is going for double the initial asking price on Amazon.com (AMZN).
This is the Ken we all need, to be frank.
But it also shows that Mattel knows, once again, how to turn up the heat on a good thing.
Just check out web visits, which include those to its online shopping site:
Note that bump on the far-right side of the chart.
After coming off the initial Barbie high, visits are ticking back up again, suggesting the muted outlook the company provided may have been too overly cautious.
No. 3: “Weak” Holiday Sales Already Priced In
The potential slowdown in the toy industry, particularly heading into the critical holiday shopping season, is being driven by concerns over inflation and a pullback in consumer spending.
Concerns over rising interest rates are still high, with LikeFolio trend data reflecting a 67% year-over-year uptick in social media mentions.
This apprehension is reflected in September’s drop in consumer confidence – leading to fears that folks may spend less on toys such as dolls and board games.
Both Mattel’s and Hasbro’s (HAS) shares have been negatively impacted by these industry concerns.
Hasbro’s third-quarter revenue fell short of Wall Street expectations, leading the company to cut its full-year revenue outlook significantly, from an initial decline of 3% to 6% to a now-anticipated 13% to 15% drop. This revision, along with the overall softer toy outlook, caused Hasbro’s shares to slide more than 12% before market opening.
Despite Mattel’s better performance in the third quarter, its stock also dropped by over 12% in premarket trading, influenced by broader industry sales concerns and a forecasted mid-single-digit decline in global toy sales for the year.
However, LikeFolio data suggests not all toy companies are created equally.
And right now, we’re seeing Mattel pull ahead in a big way – with an 18% year-over-year gain in website visits compared to Hasbro’s 22% dip.
We’ll be keeping an eye on both of these companies into the holiday season. But right now, Mattel has a leg up, and we like the long-term trajectory.
LikeFolio Investor subscribers just received a buy alert on another long-term winner, and we’ve got four more profit opportunities on the way before the year is up (at least).
But the $2 AI stock we’re targeting right now can’t wait – it’s due to report earnings this week. And with our x-ray view into this company’s web data, we can tell you average daily web visits to its core platform have surged above one million.
Translation: This microcap won’t be $2 much longer.
So you’ll want to act fast.
Until next time,
Andy Swan
Founder, LikeFolio