© Reuters Mattel (MAT) Upgraded to Buy at Goldman Sachs on “Company Specific Demand Drivers”

By Sam Boughedda

Goldman Sachs analyst Michael Ng upgraded Mattel Inc (NASDAQ:) to Buy from Neutral, increasing the firm’s price target on the stock by a dollar to $31 from $30 prior.

The analyst said that despite increasing macroeconomic uncertainty, they believe the toy manufacturer “stands out in benefiting from several company specific demand drivers in TV & film content releases, the returning Disney Princess toy license in 2023, and new product innovation.”

“MAT’s fixed cost leverage, mid-2021 and upcoming mid-2022 price increases, and peaking cost inflation should be supportive of margins over the next 2 years,” commented the analyst. “We gain confidence in MAT’s 2022 guidance for 8-10% constant currency revenue growth and EPS of $1.42-$1.48 as well as its 2023 goals of HSD constant currency revenue growth, EBIT margins of 16-17%, and EPS >$1.90.”

Ng added that Goldman Sachs’ 12-month target price on the company’s shares is now based on 16X its NTM+1Y EPS, which they view as “relatively consistent with MAT’s recent and historical multiple.”

“Specifically, MAT’s 2022 to-date average NTM P/E multiple was 16X, while its 2002-15 average NTM P/E multiple was 15X. In our view, MAT has historically traded with EPS revisions, and as MAT approaches $2 of earnings power (GS 2023E: $1.93, 2024E: $2.08) the stock should outperform.”

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