Mattel (MAT) stock surged over 15% on Monday, nearly wiping out its year-to-date losses. The upside was primarily due to the potential acquisition offer from L Catterton, a private equity firm backed by luxury giant LVMH (LVMUY). The news was first reported by Reuters. Interestingly, the news came ahead of the company’s Q2 earnings report, due for release after the bell today.
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It is worth mentioning that Mattel, a maker of iconic toys like Barbie and Hot Wheels, is not actively pursuing a sale at this time. Furthermore, L Catterton’s interest in MAT is expected to trigger a bidding war with competitors like Hasbro (HAS), which previously considered merging with Mattel.
Toy Industry Faces Challenges
The potential merger comes amid a challenging period for the toy industry, as rising prices have reduced demand following a pandemic surge. Mattel and Hasbro have been diversifying by producing movies and TV shows based on their toy brands.
Moreover, activist investors like Barington Capital have pushed Mattel to undergo restructuring and enhance its performance. Barington specifically called for exploring strategic options for the Fisher-Price and American Girl brands earlier in 2024. Moreover, the investor urged Mattel to divide the roles of CEO and Chairman, currently held by Ynon Kreiz.
MAT: Q2 Expectations
Wall Street expects MAT to report sales of $1.10 billion in Q2, up marginally from net sales of $1.09 billion in the prior-year quarter.
Backed by higher revenues and the company’s cost-saving initiatives, analysts expect Mattel’s bottom line to increase year-over-year. Analysts expect MAT to post earnings of $0.17 per share, up 70% from the prior-year quarter.
Is MAT Stock a Good Buy?
MAT has a Moderate Buy consensus rating on TipRanks, reflecting five Buy and two Hold recommendations. The analysts’ average price target on Mattel stock of $24 implies 28.48% upside potential from current levels. The stock has gained about 5% in the past six months.
