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On Tuesday, Morgan Stanley (NYSE:MS) analysts increased their price target on Mattel Inc . (NASDAQ: NASDAQ:MAT) shares to $17.00, up from $16.00, while keeping an Equalweight rating on the stock. According to InvestingPro data, analyst targets for Mattel range from $16 to $30, with the company currently trading at $16.20. The stock appears undervalued based on InvestingPro’s Fair Value analysis. The adjustment follows Mattel’s first quarter earnings, which exceeded expectations due to strong revenue and gross margin performance. The company maintains a healthy 50.9% gross margin and has achieved an impressive Piotroski Score of 8, according to InvestingPro data. Despite the uncertain economic climate and changing tariff situation, Mattel has paused its full-year guidance, attributing this decision to the difficulty in forecasting sales outcomes rather than challenges in assessing the net impact of tariffs.
The company expressed confidence in its ability to offset additional costs at current tariff rates through various mitigation strategies. With a strong current ratio of 2.38 and liquid assets exceeding short-term obligations, Mattel demonstrates solid financial health, earning a "GOOD" overall rating from InvestingPro. By fiscal year 2025, Mattel anticipates reaping benefits from the flexibility of its global supply chain, further cost savings, and expected pricing adjustments. Additionally, efforts to diversify its manufacturing base beyond China could potentially enhance its profit and loss statement in fiscal years 2026 and 2027.
Mattel has also reported that it has not experienced any significant order cancellations to date and that its year-to-date point-of-sale figures are up. The company sees opportunities to capture more shelf space in the event of product shortages, which could help offset any potential decline in consumer spending. However, Morgan Stanley analysts voiced concerns regarding Mattel’s ability to implement price increases without adversely affecting demand, as well as potential long-term effects on the health of the company’s brands and categories.
In light of these factors, Morgan Stanley has revised its estimates to reflect a less severe impact from tariffs, resulting in the increased price target. However, the firm maintains its Equalweight rating due to the limited visibility into the company’s future performance.
In other recent news, Mattel Inc. reported its first-quarter 2025 earnings, exceeding Wall Street expectations despite facing industry challenges. The company posted an adjusted earnings per share (EPS) of -$0.05, surpassing the forecasted -$0.09. Revenue reached $827 million, exceeding the anticipated $786.01 million, marking a 2% increase from the previous year. Mattel’s strategic initiatives, including supply chain diversification, helped mitigate the impact of tariffs, with potential cost exposure estimated at $270 million. The company repurchased $160 million in shares during the quarter and maintained a strong cash balance of $1.24 billion. Analysts noted that Mattel’s stock experienced a minor decline in after-hours trading despite the positive financial results. The company has paused its full-year 2025 guidance due to ongoing tariff uncertainties but remains committed to its $600 million share repurchase target. Mattel’s CEO expressed confidence in the company’s ability to offset potential tariff costs through strategic actions.
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