Shares of Mattel Inc. have experienced an upward trend in recent weeks, as the demand for toys begins to show signs of improvement. Investors are eagerly awaiting the release of the highly anticipated “Barbie” movie this Friday, which has further contributed to the positive momentum. However, analysts at D.A. Davidson caution that while expectations for a substantial sales rebound in the second half of the year are high, the film may not have a significant impact on the toy maker’s share price.
According to Linda Bolton Weiser and Christina Xue, analysts at D.A. Davidson, the excitement surrounding the “Barbie” movie and indications of reduced retail inventories have played a role in boosting the share price. However, they note that the company’s 2023 guidance already assumes a strong sales recovery in the second half of that year, leaving little room for the stock to exceed expectations. As a result, the analysts are not overly enthusiastic about the stock’s prospects.
Despite this cautionary stance, shares of Mattel were down 2.4% on Tuesday. Nevertheless, the stock has seen a 17% increase year-to-date, with much of the growth occurring in late June.
Directed by Greta Gerwig and featuring Margot Robbie and Ryan Gosling, the release of “Barbie” comes at a challenging time in the entertainment industry. Hollywood writers and actors are currently on strike, while investors are pressuring major studios to generate profits from streaming platforms. Furthermore, theaters, which have struggled with dwindling attendance due to the rise of home viewing, are banking on movies like “Barbie,” “Oppenheimer,” and other recognizable franchises to revive sales back to pre-pandemic levels.
While Mattel has grappled with reduced toy demand following initial pandemic-driven interest, retailers have been hesitant to stock up on toys. In fact, Hasbro Inc. announced layoffs of approximately 15% of its workforce earlier this year as a result of the challenging market conditions.
“Barbie” Movie Sets Expectations High for Mattel and Warner Bros.
Barbie, the iconic doll brand from Mattel, is set to make its way to the big screen in a highly anticipated movie. Produced by Warner Bros., the film has the potential to not only benefit Mattel and Warner Bros. Discovery Inc., but also other brands like Crocs Inc., which has recently launched a line of Barbie footwear. Even Airbnb got in on the action by creating a promotional listing for a dazzling pink home in Malibu inspired by the upcoming movie.
According to UBS analyst Arpiné Kocharyan, Barbie is Mattel’s most profitable franchise. However, with such a grand marketing campaign, expectations for sales are soaring. “Barbie has never had a box office event of this scale before, and Mattel’s management fully acknowledges the risks and opportunities that come with such an undertaking,” Kocharyan stated.
While the “Barbie” movie may not be specifically aimed at children, D.A. Davidson analysts believe it will still have a positive impact on toy sales in the short term. Additionally, profits and licensing revenue are expected to benefit from the movie’s release. Furthermore, the analysts believe that the film could help bolster the pop-culture relevance of the Barbie brand, which has faced criticism over the years.
Addressing some of the negative sentiments surrounding Barbie, actress Margot Robbie, who portrays Barbie in the film, acknowledged the brand’s complex reputation. She stated in a recent interview, “We of course would want to honor the 60-year legacy that this brand has. But we have to acknowledge that there are a lot of people who aren’t fans of Barbie. And in fact, aren’t just indifferent to Barbie. They actively hate Barbie and have a real issue with Barbie. We need to find a way to acknowledge that.”
As the release of the “Barbie” movie approaches, all eyes are on Mattel and Warner Bros., as they navigate the exciting and challenging journey of bringing Barbie from the toy aisle to the silver screen.