MAT

Mattel Inc

Consumer


Presented:08/15/2016
Price:$34.02
Cap:$11.60B
Current Price:$18.66
Cap:$6.34B

Presented

Date08/15/2016
Price$34.02
Market Cap$11.60B
Ent Value$12.50B
P/E Ratio33.35x
Book Value$6.78
Div Yield0.05%
Shares O/S340.93M
Ave Daily Vol3,122,508
Short Int10.35%

Current

Price$18.66
Market Cap$6.34B
Mattel, Inc. designs, manufactures and markets a broad variety of toy products. It operates through three segments: North America, International and American Girl. The North America segment markets and sells toys in the U.S. and Canada through the Mattel Girls & Boys Brands and Fisher-Price Brands categories. The International segment includes the products marketed by the North America segment, although some are developed or adapted for particular international markets. The American Girl segment is a direct marketer, children's publisher, and retailer best known for its flagship line of historical dolls, books, and accessories, as well as the My American Girl and Bitty Baby brands. The company was founded by Elliot Handler, Ruth Handler and Harold Matson in 1945 and is headquartered in El Segundo, CA.

Publicly traded companies mentioned herein: Hasbro Inc (HAS), Mattel Inc (MAT), Walt Disney Co (DIS)

Highlights

Shares of Mattel (MAT) could see 40% - 50% downside over the next 6 months if the presenter’s bearish thesis plays out as he envisions. He views MAT as a “high multiple, structurally challenged” business following the loss of the $450mm Disney Princess (DP) contract to Hasbro. A 4.5% dividend yield has attracted investors, but the company is relatively levered at 2.25x and at 26x expected 2016 earnings shares have been bid up to a point that further upside seems unlikely, in his opinion. Barbie sales have been better than expected, but this may be unsustainable given that the brand is not linked to any other entertainment (i.e., a movie or cartoon), and given the top line challenges he sees MAT facing the presenter thinks Street estimates will need to come down and margins will erode. To the extent cash flow is negatively impacted, he sees optionality around a cut to the dividend.

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Idea Discussion

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