Investing.com -- Jefferies in a note dated Wednesday has upgraded Mattel (NASDAQ:MAT) to a "buy" rating, citing the toy company's return to sales growth and a strong pipeline of entertainment and product launches.
Shares of the toy company surged 12.9% in pre-open trade at 09:05 ET (14:05 GMT).
The move comes after Mattel reported a solid fourth-quarter performance and issued 2025 guidance forecasting sales growth of 2% to 3%.
As per the analysts at Jefferies, Mattel is poised to capitalize on an expanding entertainment portfolio, new brand collaborations, and a broader distribution network.
The brokerage sees potential for Mattel’s revenue growth to outpace the toy industry’s estimated 3.5% annual growth rate, driven by upcoming theatrical releases such as Minecraft, Snow White, Jurassic World, and Wicked, as well as partnerships like Hot Wheels’ collaboration with Formula 1.
Jefferies also raised its price target for Mattel shares to $28, up from $20, reflecting expectations of a valuation re-rating.
The analysts believe that as Mattel returns to growth, its shares could trend back toward the company's five-year average enterprise value-to-EBITDA multiple of 9x, compared to the current level of 7x.
The analysts noted that Mattel has struggled with negative sales trends—excluding the Barbie franchise—for the past 10 quarters, but the company’s recent results signal a turnaround.
Alongside movie tie-ins and new content, Mattel is set to benefit from expanded distribution of brands like WWE and Fisher-Price, as well as new animated content for Hot Wheels, Barbie, Thomas & Friends, and Barney’s World.
Jefferies sees upside potential beyond Mattel’s official guidance, estimating that sales could grow closer to 4% year-over-year.
The brokerage also suggests that Mattel's margin guidance may be overly conservative, given the expected growth in sales and operating efficiency improvements.