On Monday, Roth/MKM maintained a Neutral rating on Mattel Inc . (NASDAQ:MAT), with a steady price target of $21.00.
The firm's stance is influenced by the upcoming holiday season and the current valuation of Mattel's shares. Despite the season's potential for increased sales, Roth/MKM remains cautious due to a lack of significant growth drivers for the company's revenue.
The firm acknowledges that Mattel's shares are relatively inexpensive, trading at approximately 13.5 times the current year's earnings per share (EPS). However, the firm is hesitant to adopt a more positive outlook without clear indicators of sustainable growth.
The price target of $21.00 is calculated based on roughly 15 times the estimated EPS for 2024 or 13.5 times the projected EPS for 2025.
Roth/MKM points out that the uncertainty surrounding Mattel's strategy to expand its Entertainment division is a key concern. The firm is looking for evidence that Mattel can transform its Entertainment segment into a significant and reliable source of growth. Until such strategies are clarified and show promise, Roth/MKM prefers to maintain a cautious approach.
In other recent news, Mattel's Q2 2024 financial results showed a minor 1% decrease in net sales, but an increase in its adjusted gross margin to 49.2%. Investment banking firm Jefferies has revised its price target for Mattel's shares to $20.00, citing the company's successful brands like Barbie and Hot Wheels as key growth drivers. Meanwhile, Goldman Sachs reaffirmed its Buy rating on Mattel, maintaining a steady price target of $22.00.
Mattel's CEO, Ynon Kreiz, was awarded a performance-based stock grant valued at $15 million, contingent on achieving ambitious performance metrics over a five-year period.
In leadership updates, Mattel appointed Jennifer Kettnich as Vice President of Investor Relations and Ken Wee as Executive Vice President and Chief Strategy Officer. Additionally, Sai Koorapati was named Senior Vice President and Chief Technology Officer, overseeing the company's technological advancements and online security initiatives.
InvestingPro Insights
To complement Roth/MKM's analysis, recent data from InvestingPro offers additional context on Mattel's financial position. The company's P/E ratio stands at 20.76, slightly higher than the 13.5 times mentioned in the article, suggesting a potential shift in valuation since the analysis. Notably, Mattel's PEG ratio of 0.49 indicates that the stock might be undervalued relative to its earnings growth, which could be of interest to value-oriented investors.
InvestingPro Tips highlight that Mattel has a perfect Piotroski Score of 9, signaling strong financial health. This aligns with the article's mention of the company's relatively inexpensive shares but adds a positive perspective on its financial stability. Additionally, management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's future prospects.
The data also shows that Mattel's revenue for the last twelve months as of Q2 2024 was $5,428.71 million, with a revenue growth of 7.3% over the same period. This growth, coupled with the InvestingPro Tip that net income is expected to grow this year, may provide some reassurance against the concerns about lack of growth drivers mentioned in the article.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Mattel's financial health and market position.
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