Shares of toy products and content creator Mattel (NASDAQ:MAT) stock peaked out $23.31 on Apr. 23, 2021 and has since been slowly selling off into the high teens. This may be setting up some early holiday shopping for prudent investors seeking exposure in this iconic brand. Despite the materials inflation, shipping delays and supply chain issues on the West Coast, Mattel raised growth expectations in the recent earnings release. The Company is seeing a resurgence in its iconic brands like Barbie and Hot Wheels along with the relaunch of He-Man and the Masters of the Universe series on Netflix (NASDAQ:NFLX) and producing its thirteenth movie in development with Polly Pocket. The Company is also launching its own nonfungible tokens (NFTs) on its intellectual properties (IPs). Prudent investors looking for exposure in this iconic brand can watch for opportunistic pullbacks ahead of the holiday shopping season.
Q2 FY 2021 Earnings Release
On July 27, 2021, Mattel released its fiscal second-quarter 2021 results for the quarter ending June 2021. The Company reported an earnings-per-share (EPS) profits of $0.03 beating analyst estimates for a loss of (-$0.06), by $0.09. Revenues rose 40.2% year-over-year (YoY) to $1.03 billion, beating analyst estimates for $890 million. North American gross billings rose 30% and worldwide gross billings for dolls rose 51% to $395 million. Worldwide gross billings for infant, toddler and preschool were up 15% to $229 million driven by Fisher-Price and Thomas & Friends. Worldwide gross billings for toy vehicles rose 68% to $266 million led by Hot Wheels, Matchbox and CARS. Adjusted gross margin rose to 47.5% from 43.8%. The Company grew market share for the third straight quarter. Mattel CEO Ynon Kreiz commented:
“This was another exceptional quarter for Mattel, with outstanding consumer demand for our product. Our strength is foundational and broad-based. We believe we are in the strongest position we have been in many years to improve profitability and accelerate topline growth. This is an exciting time for Mattel. Our overall performance this quarter and comprehensive topline growth is adding momentum to our transformation strategy. We are now firmly in growth mode and establishing Mattel as an IP-driven, high-performing toy company.”
Raised Guidance Estimates
Mattel raised its guidance expectations with annual net sales growth to nearly double to 12% to 14%, up from %6 to 8% range. The Company expects mid-single-digit growth in 2022 and 2023. Adjusted EBITDA for 2021 was raised to $875 million to $900 million, up from $800 million to $825 million.
Conference Call Takeaways
CEO Kreiz set the tone:
“Key highlights for the second quarter as compared to the same period in the prior year are net sales were up 40% as reported and 36% in constant currency. Adjusted gross margin improved by 370 basis points and reached 47.5%, the 12th consecutive quarter of growing gross margin and adjusted EBITDA was $131 million, more than four times the same period last year. Our tremendous momentum continued with strong double-digit growth in gross billings in each of our four regions, double-digit growth across the four reported categories and double-digit growth in our three power brands Barbie, Hot Wheels and Fisher-Price and Thomas & Friends, as well as double-digit growth for American Girl. This is an exciting time for Mattel. Having successfully completed the heavy lifting of the transformation over the past three years, we are now in growth mode and establishing Mattel as an IP-driven, high performing toy company. Taking a broader look at this quarter as part of our recent performance and continuous significant improvement across key metrics, gross billings grew double digits for the fourth quarter in a row. Total company POS grew double digits for the fourth quarter in a row, and we have achieved positive POS growth for the last five quarters and global market share also grew for the fourth consecutive quarter according to NPD. Also, according to NPD, Mattel was the largest and fastest growing of the top five toy manufacturers in the US on a year-to-date basis.”
Intellectual Property (IPs) and Non-Fungible Tokens (NFTs)
CEO Kreiz noted:
“Key highlights for the second quarter as compared to the same period in the prior year are net sales were up 40% as reported and 36% in constant currency. Adjusted gross margin improved by 370 basis points and reached 47.5%, the 12th consecutive quarter of growing gross margin and adjusted EBITDA was $131 million, more than four times the same period last year. Our tremendous momentum continued with strong double-digit growth in gross billings in each of our four regions, double-digit growth across the four reported categories and double-digit growth in our three power brands Barbie, Hot Wheels and Fisher-Price and Thomas & Friends, as well as double-digit growth for American Girl. This is an exciting time for Mattel. Having successfully completed the heavy lifting of the transformation over the past three years, we are now in growth mode and establishing Mattel as an IP-driven, high performing toy company. Taking a broader look at this quarter as part of our recent performance and continuous significant improvement across key metrics, gross billings grew double digits for the fourth quarter in a row. Total company POS grew double digits for the fourth quarter in a row, and we have achieved positive POS growth for the last five quarters and global market share also grew for the fourth consecutive quarter according to NPD. Also, according to NPD, Mattel was the largest and fastest growing of the top five toy manufacturers in the US on a year-to-date basis.”
Opportunistic Entry Levels
Using the rifle charts on weekly and daily time frames provides a precision view of the landscape for MAT stock. The weekly rifle chart turned bearish after peaking near the $23.35 Fibonacci (fib) level. Shares have been selling off on the weekly market structure high (MSH) sell trigger under $22.00. The weekly breakdown has a falling 5-period moving average (MA) at $20.08 heading towards the weekly lower Bollinger Bands (BBs) near the $18.02 fib. The weekly stochastic has a mini inverse pup oscillation down falling under the 40-band. The daily rifle chart has an inverse pup breakdown with a falling 5-period MA resistance at $19.09 as it coils off the daily lower BBs at $18.18. The daily stochastic has fallen to the 20-band and stalled out for either a cross back up on the daily market structure low (MSL) buy trigger above $19.61 or a mini inverse pup. Prudent investors can watch for opportunistic pullbacks levels at the $18.27 fib, $17.55 sticky 2.50s level, $17.07 fib, $16.42, and the $15.68 sticky 5’s level.