Goldman Sachs Takes Coverage of Mattel (NASDAQ: MAT) with a Buy rating as it points to the return of the Disney princesses, margin expansion and capital return potential as reasons to be positive on stock of toys.
Analyst Michael Ng and team see an opportunity for Mattel ( MAT ) to grow EPS faster than consensus expectations driven by accelerated revenue growth supported by successful relaunches of the Disney Princess and Monster High fashion doll franchises, as well as a strong slate of upcoming spin-offs such as the Barbie movie . Completion of the toy company’s previously announced cost-cutting program is expected to boost earnings. There is also an opportunity for Mattel to significantly increase its share buyback early this year.
On the valuation: “At 12.5x NTM EPS, we view the valuation as cheap relative to the market and on a historical basis given i) a relatively high degree of topline and margin visibility (in our view), ii) improved balance sheet flexibility and expected capital return capacity, and iii) our outlook for EPS growth acceleration. We see 29% upside to our 12-month price target of $26 based on 14.0x NTM +1Y EPS.”
Shares of Mattel ( MAT ) rose 0.83% in premarket trading at $20.63 versus a 52-week trading range of $16.21 to $26.99.