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Mattel Offers Strong Earnings Outlook, Gets Upgrade to Buy From Citigroup

Mattel issues a strong earnings outlook for this year and beyond, while Citigroup raises its rating on the stock to buy.
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Mattel  (MAT)  offered a strong earnings outlook for this year and beyond, and Citigroup raised its rating on the stock to buy from neutral.

At its investor day presentation, Mattel forecast adjusted EBITDA of $775 million to $800 million this year, up from $719 million in 2020.

The toy maker estimated revenue would increase in the mid-single digits in 2021-2023 from $4.58 billion last year. Mattel executives said they anticipate operating margins will remain in the mid-teens through 2023. The company predicted cost cuts of $250 million by 2023, compared to $1 billion for 2018-2020, according to a report from CNBC.

Mattel traded at $19.65, up 0.72%, and has climbed 52% over the past year amid strong demand for toys from families stuck at home during the COVID-19 pandemic.

Citi analyst Shawn Collins, meanwhile, upgrade Mattel shares before the company’s presentation, lifting his price target to $22.50 from $20.

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Mattel’s impressive performance in the second half of last year, rising operating margins and its debt reduction led him to upgrade the stock.

“Retail toy demand remains robust into 2021, and we expect it will be further aided by Biden administration stimulus and a rebounding US economy,” he said.

Morningstar analyst Jaime Katz puts fair on the stock value at $21. 

“Longer-term, efforts focused on elevating key brands (Barbie, Hot Wheels), winning new licenses, and increasing supply chain speed could support sales and market share growth at Mattel,” she wrote earlier this month.

“The ongoing shift to a capital-light strategy should lead to structurally lower capital and operating expenditures than in the past,” Katz added.