Mattel
stands to snap up dollars from licensing efforts, which should lift the toymaker’s stock higher, one analyst team argued.
Morgan Stanley analysts led by Megan Alexander initiated coverage of Mattel stock (ticker: MAT) at Overweight with a $27 price target, and called it a “top pick” in a Wednesday report on the leisure sector.
Mattel stock is up 3.5% to $21.96 in Wednesday trading.
Consumer spending is going to tick down as student-loan repayments restart and drag on discretionary spending into next year, analysts explained. That said, within leisure, “valuations appear reasonable, if not cheap,” and using a nine-factor framework that included stability, pricing, and industry trends, the analysts set out to find names “with visibility into achievable earnings.”
Alongside Mattel, that led Morgan Stanley to launch coverage of shares of
Hasbro
(HAS),
Xponential Fitness
(XPOF), and
Planet Fitness
(PLNT), at Overweight, with respective price targets of $84, $27, and $62.
Analysts also started coverage of golf-equipment maker
Topgolf Callaway Brands
(MODG) and grill-maker
Traeger
(COOK) at Underweight, with respective price targets of $12.50 and $3.
Morgan Stanley prefers toys/gaming and fitness, citing relative stability in the categories, but expressed caution on more big-ticket items, including boats and grills, pointing to the delayed impact of higher rates on demand.
Looking at Mattel specifically, analysts expect financial performance to improve as gross margin recovers, amid a downturn in input costs, rebalancing inventory, cost savings, and a boost “from highly accretive licensing efforts”—think the Barbie movie. The stock is trading cheaper than it used to—at a price/earnings ratio of 15 times—analysts noted, but they expect it to bounce back and pointed to third-quarter earnings as a potential place to win.
Hasbro stock is 0.1% lower to $65.19 on Wednesday.
“We expect upward revisions as the new [
Hasbro
] management team executes on its strategic plan to simplify the business, cut costs, invest in innovation, and drive core topline growth,” they wrote in the report. “The pending sale of the entertainment business will simplify the story, improve FCF visibility, and free up management time to shift focus back to the core.”
Write to Emily Dattilo at [email protected]
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