BY MARK SEBASTIAN 

July 27, 2023

Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.

Have a stock YOU want us to review? Email my team here. – Mark

Hey Traders,

If you had the Barbie movie for the highest grossing movie of the year, you just made a lot of money.

Betters had their dollars on Guardians of the Galaxy 3, Transformers, and maybe the latest Ant Man.

But no … it is going to be Barbie.

And it’s not just little kids going – it’s adults … a LOT of adults going to see the movie.

By the time this movie is done, it’s likely going to make more than $500 million worldwide, maybe more.

But as big as the movie is, can it translate to a line of Barbie toys that has gone tepid?

Yes, there will always be little girls that want the Barbie Doll and her pink Corvette, but can the movie illicit growth in the line?

And what financial footing is Mattel (Ticker: MAT), the maker of Barbie, on, and where could it go?

Let’s break it down.

The Good

Barbie has had her competitors – Bratz, My Little Pony, Beanie Babies, Frozen …

But in the end, she seems to always come out on top.

But that doesn’t mean the line is growing. Mattel actually saw a fall in sales of Barbie Dolls last quarter, despite surprising with a profit.

Mattel is seeing growth in other areas like Halo.

The question is whether Mattel can leverage the Barbie movie into toy sales.

My wife saw the movie over the weekend and loved it … she did NOT go buy a doll.

Mattel will make some money selling these movies – there will be a Barbie 2 – but can they leverage that into toy sales?

There are other lines that also seem to be coming from the dead. He-Man, the cult classic cartoon and toy that BLEW up when I was five, has had a bit of a resurgence.

Is Mattel smart enough to leverage a movie NOT starring Dolph Lundgren around that toy?

Unlike women, there’s a huge audience of 80’s enthusiasts that might actually buy that toy. I have two He-Man guys on my shelves behind me as I write this.

Regarding the movies, Mattel has figured something out … can they leverage that?

Looking at the numbers, MAT looks less impressive – a PE of 29, falling revenue, no dividend.

The price to sales isn’t bad at 1.44, and the fact that it makes money makes the company interesting.

It’s all about the leverage … which brings me to the Bad.

The Bad

It’s ALL about leveraging the success of this movie and future movies.

Barbie is an old line that is dated. Moms and Dads conscious of body image are not jumping to Target or Walmart to buy their daughter a Barbie doll.

This movie has presented Mattel with an opportunity to create a Frozen-style character designed around Margo Robbie that has somewhat normal dimensions (although really not normal).

If I had a daughter and that was presented as an option, I could see many women that LOVED the movie going after that for their daughters.

It would likely not hurt traditional Barbie sales, but it would present a line of growth for the line.  

Mattel didn’t see the success of the movie coming and doesn’t have a doll ready right now.

That is REALY REALY bad.

If they make other movies, I would hope they would learn this lesson.

The Verdict

The company is not in a position to leverage its own success – I would stay away.

Your Only Option,

Mark Sebastian