Mattel
has catalysts for growth ahead, while competitor
Hasbro
has more to prove, according to Citi.
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 risen 15% so far this year, to around $20.50 on Friday.
Hardiman also started coverage of
Hasbro
(HAS) with a Neutral rating and a price target of $62.
Hasbro
stock has stumbled 8.3% in 2023, trading just under $56 Friday morning.
The toy industry has faced multiple headwinds, including inventory backups, rising inflation, and a downbeat consumer. Retailers ended up overstocking on toys in 2022, as high prices and weaker-than-expected demand led to a disappointing holiday season.
While there are still risks as the holiday shopping season begins,
Mattel
is ready for a turnaround, Hardiman says.
“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.
Mattel and
Walt Disney
(DIS) reached a licensing deal in January 2022, enabling the toy maker to create and sell Disney princess merchandise. Mattel had lost the license to Hasbro in 2016. Buzz for the Barbie movie also has Hardiman bullish on the stock. The film did incredibly well at the box office, and has brought a lot of attention to the famous Mattel doll originally founded in 1959.
“At a minimum we would expect to see a surge of Barbie sales in the upcoming season and beyond, with what we can only assume will be a Barbie sequel or sequels in coming years,” he said.
Mattel is expected to report third-quarter financial results after the market close on Oct. 25. Investors will be looking for clues on what the success of the Barbie movie, licensing deals, and the current state of the consumer mean for the company’s future.
As for Hasbro, Hardiman recommends waiting on the sidelines, noting a relatively new management team. CEO Chris Cocks took the helm in February 2022, and Gina Goetter became CFO this past May.
“For now, we think a Neutral rating is appropriate as the new(ish) management team continues to get their legs beneath them, particularly given the macro risk and a fickle consumer as we head into the critical holiday season,” the analyst said.
Hasbro announced last year a new plan called “Blueprint 2.0” that switches the company’s focus from toys to becoming a broader entertainment company. Investors likely will want to hear an update on that transformation when the maker of Monopoly reports earnings Oct. 26.
The company’s Wizards of the Coast business is “the crown jewel of the Hasbro portfolio,” Hardiman wrote. He cites the continued success of games Dungeons and Dragons and Magic the Gathering, as well as the surging popularity of the new videogame, Baldur’s Gate 3.
Write to Angela Palumbo at angela.palumbo@dowjones.com
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