Mattel Surpasses Expectations in Q3 Earnings, But Falls 8%: 3 Reasons Why it May Be Time to Sell

Shares of Mattel (MAT) fell as much as 16% in pre-market trading Thursday morning, before settling at around an 8% loss when the market opened. This came after the toymaker shared its third-quarter earnings.

The company beat out analyst expectations on the top and bottom line, reporting an EPS of $1.08 compared to the $0.86 consensus. Revenue of $1.92 billion beat the $1.81 expectation.

Gross billings is a key sales metric for the company, and the $2.12 billion reported for the third quarter was a 9% growth year over year. A huge chunk of the toymaker’s performance across all these financial metrics can be attributed to the Barbie Boost.

The Barbie brand saw a 16% surge in gross billing year over year to $605.1 million. This picked up the slack elsewhere in the company’s doll department, resulting in a 27% boost to the segment as a whole.

The pop-culture phenomenon film was a saving grace for the company, which was able to push performance back in the right direction after what had otherwise been a challenging year. And, not just for Mattel itself – but the toy industry as a whole.

Looking ahead to the future, the company raised its guidance for the full year of 2023. Adjusted EPS is expected to fall between $1.15 to $1.25, up from the previous guidance of $1.10 to $1.20. Analysts are looking for $1.21 for the full year.

That being said, why did shares of MAT fall so heavily with this news? The concern is that the hype surrounding Barbie will die down – and without this segment thriving, Mattel will struggle.

In fact, the company saw a 19% drop in gross billings year over year for a key segment comprised of action figures, building sets, games, and other toys. Moreover, the American Girl segment has now declined for the 8th consecutive quarter.

We’ve dug deeper and analyzed MAT through the VectorVest stock forecasting software. We’ve uncovered three other things that should be cause for concern if you’re currently invested in this stock…

MAT Has Poor Upside Potential, Safety, and Timing - It’s Time to SELL!

VectorVest simplifies your trading strategy by telling you what to buy, when to buy it, and when to sell it. It’s all based on a proprietary stock rating system comprised of 3 ratings: Relative Value (RV), Relative Safety (RS), and Relative Timing (RT).

Each of these ratings sits on its own scale of 0.00-2.00, with 1.00 being the average. This allows for quick and easy interpretation. But, it gets even easier. VectorVest issued a clear buy, sell, or hold recommendation based on these ratings for any given stock at any given time. As for MAT:

• Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out) to AAA corporate bond rates and risk. It offers far superior insights than a simple comparison of price to value alone. MAT has a poor RV rating of 0.60. It’s also overvalued, with a current value of just $10.25.
• Poor Safety: The RS rating is an indicator of a stock’s risk profile. It’s computed through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, and business longevity. The RS rating of 0.81 is poor for MAT.
• Poor Timing: While the immediate drop-off this morning is concerning, the real trouble is that MAT has been battling a negative price trend for some time - it’s down nearly 14% in the past few months. This performance is reflected by a poor RT rating of 0.78. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.

The overall VST rating of 0.75 is poor for MAT, leaving no question - it’s time to SELL this stock. Get a stock analysis free today if you want to learn more about the VectorVest system and change the way you trade for the better!

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VectorVest advocates buying safe, undervalued stocks, rising in price. While MAT delivered impressive earnings for the third quarter, shares fell more than 8% on concerns of underperformance everywhere besides the Barbie segment. The stock has poor upside potential, safety, and timing.

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