On Wednesday, Mattel Inc . (NASDAQ: NASDAQ:MAT) experienced a positive adjustment in its stock forecast. Analysts from DA Davidson increased the price target on the toy company's shares to $27.00, up from the previous $26.00, while reaffirming a Buy rating.
The revision comes after Mattel reported a first-quarter sales shortfall, attributed primarily to retailer inventory cuts, especially in the Europe, Middle East, and Africa (EMEA) region. Despite this, the company surpassed profit expectations, driven by a significant gross margin expansion of 830 basis points year-over-year.
Mattel's stock is expected to trade higher following the announcement. The company anticipates a downturn in the toy industry for the year 2024, yet its year-to-date point of sale (POS) figures through mid-April remained steady compared to the previous year. The first quarter also showcased an impressive free cash flow performance, with Mattel allocating $100 million towards share repurchases.
The guidance for the full year 2024 remains unchanged. However, DA Davidson analysts have modestly increased their sales forecast for Mattel and have raised their annual earnings per share (EPS) estimates by $0.07, or 5%. This adjustment is reflected in the new price target, which is based on a 17 times multiple of the projected 2025 earnings per share of $1.58, up from the earlier estimate of $1.51.
The report indicates that despite the challenges faced in the first quarter, Mattel's cost management and financial strategies have yielded a more robust profit than anticipated. This has led to a more optimistic outlook from analysts, as reflected in the increased earnings estimates and price target for the company's stock.
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