Thursday, 25 April 2024

Why Mattel Stock Jumped This Morning

by BD Banks

Shares of toy company Mattel (NASDAQ: MAT) jumped on Wednesday morning following its financial report for the fiscal first quarter of 2024. As of noon ET, Mattel stock was up almost 5%.

Investors look past some shortcomings

The stock market’s positive reaction to Mattel’s financial results is a little surprising. Q1 net sales were down 1% year over year to $810 million, which was below expectations. The company’s gross margin had a strong improvement to 48%. Its net loss improved by $78 million compared to the prior-year period. But despite the profit improvements, it still had a Q1 net loss of $28 million.

In short, Mattel’s financial results may have had some encouraging elements, but I wouldn’t necessarily call them good.

For the rest of the year, Mattel’s guidance is modest. The company expects sales to be flat compared to 2023. And it expects its free cash flow to drop to $500 million compared with over $700 million last year.

Plenty of silver linings

With brands such as Barbie, Hot Wheels, and Fisher-Price, Mattel has some of the most recognizable properties in the business. The company seeks to keep these at the forefront of consumer awareness and leverage them for other opportunities, such as last year’s Barbie movie. And it’s in a solid financial position with around $1.1 billion in cash.

Mattel’s shareholders will be rewarded with share repurchases and dividend payments in 2024. But keep in mind that management doesn’t expect top-line growth until 2025. The stock might not have much upside before that growth starts materializing.

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Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.