Earnings season has been a bit rough these days, but toy maker Mattel (NASDAQ:MAT) turned it around with a mixed earnings report that featured declining revenues, but improving earnings thanks to a series of cost-cutting efforts. But businesses cannot cut costs indefinitely, and Mattel offered up a set of plans to improve the revenue side of things. Investors were not at all pleased and sent shares down over 4% in Thursday afternoon’s trading.
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One of the biggest plans Mattel has is a new partnership with Samsung that will see three free ad-supported television (FAST) channels released. Known as Mattel Jr., Hot Wheels Action, and Barbie & Friends, the three channels will go live later this year and feature pretty much exactly what the channel names suggest. Several popular Mattel brands will have content on these channels, including “Masters of the Universe” and, not at all surprisingly, “Barbie.”
The channels in question will be available through several Samsung devices and via a web-based platform for those with non-Samsung devices. In fact, Mattel just augmented its Mattel TV Studios bench with three new hires: Amy Suh, Cory Bennett Lewis, and Sidney Clifton. The three will report directly to Mattel TV Studios’ global head, Michelle Mendelovitz, and focus mainly on production.
A Threat to Cost Cutting
Yesterday, Mattel stockholders were reasonably satisfied with reports; while bad news was certainly in the cards as parents pulled back on toy purchases, Mattel’s commitment to reducing inventory—along with its accompanying carrying costs—was rewarded. Now, we find that Mattel is planning to reverse a lot of those cuts with new hires and new expansion plans. While the expansions are comparatively modest and will likely depend on plenty of pre-existing content that can potentially sell ad space, it’s safe to say that investors are a lot less happy than they were based on today’s figures.
What Is the Price Target for Mattel?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on MAT stock based on six Buys and five Holds assigned in the past three months, as indicated by the graphic below. After an 8.4% rally in its share price over the past year, the average MAT price target of $23.10 per share implies 26.13% upside potential.
Is It Wise to Allocate $1,000 Toward MAT Stock Right Now?
Before you hurry to invest in MAT, think about the following:
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