Once upon a time Barbie was the queen of the block, and Hot Wheels were the hottest hand held rides around. Mattel was one of the largest and most successful toy companies in history, but as too often happens, Mattel hit a large, comfortable spot and stopped striving for innovation.
Over the past year MAT has plummeted by nearly 40% as the company has struggled to compete with Lego, Disney, and other companies. Now the company has ousted its CEO, Bryan Stockton and has warned that the company will likely suffer its 5th straight quarterly drop. MAT quickly plummeted, dropping as much as 11%, but has since begun to rebound.
So is MAT a value buy right now? Could stock prices have bottomed out? Or would you be better off shorting MAT? How about its competitors? Let’s dig in!
Barbie’s Decline, The Death of a Company?
The real secret behind Mattel’s collapse is the decline of the famed Barbie dolls. Once upon a time (2009) Barbie accounted for 25% of all doll sales in the United States, but over the last few years that market share has begun to decline rapidly. Now Barbie accounts for only about 19% of dolls sold, having declined over the last several years.
Worse, while other toy makers have found ways to diversify, Mattel has clung to its guns. It wasn’t too long ago that Lego was struggling, but then it started producing games & movies, and also teamed up with various film franchises to produce hot new Lego sets. Disney has suffered various period of stagnation, but has always rebounded.
And yet MAT has continued to wither away. So far no leadership has come into Mattel with any clear vision or any clear path for change, and that has us worried. It is very easy and tempting for companies to get too comfortable in their own skin, and when they do so the results are usually bad for investors.
Skip Mattel, Buy Disney
The only way we’d recommend Mattel is as a short-sale. Mattel has simply fallen too far behind its competitors and until we see details of a turn-around plan or an enticing product line-up, we won’t be investing in Mattel.
We do believe hot toy brands are worth investing in, and especially those toy brands that have a big presence in Asia, and specifically China. While populations are aging in the West and Japan, China, Malaysia, and numerous other Asian countries have fast growing populations that are also growing richer as the years go by.
We believe that Disney, however, will be the biggest winner abroad. Disney’s combination of toys, movies, video games, among other things, allows it to leverage its huge brand name to secure sales at a variety of points.
The post Mattel, Inc. (MAT): Time to Short Sell Toy Maker? appeared first on ValueWalk.
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