Is Mattel the Next Marvel Films?
Mattel (MAT) the toy company recently announced it's Mattel Film division, even naming Robbie Brenner as its executive producer. However, before you buy Mattel's stock with comparisons to Marvel Films, Lego Group Films, and Hasbro's Transformer movies in mind, here are a few things to consider.
Currently Mattel's stock price trades above $15 per share. Since trading in the high $40 range in 2013 the stock has seen a slow decline to it's current price. The popular theory for Mattel's stock price decline is that children don't play with toys as much as they use to, and by looking at Mattel's declining revenue it's hard to argue with that theory.
As for Marvel starting its own film division saved Marvel Comics when comic book sales declined and now Mattel Films is hoping that movies can do the same for the struggling toy maker.
Like Marvel, Mattel does have a few well known franchises, with Barbie being the most well known. The company also has Hot-Wheels and Masters of the Universe to name a few. A Barbie Film or a He-Man film, if done correctly could do wonders for Mattel if they're able to win at the box-office and at the toy store.
Robbie Brenner, who was named Mattel Film's executive producer has a very impressive resume. She was the producer of "Dallas Buyers Club" and she also oversaw production on "The Fighter," and "Dear John." Brenner and Mattel won't be going it alone, to limit risk Mattel will be using a third party source for producing and financing their films.
As for adding Mattel's stock to the portfolio, investors may want to wait a while. Mattel did try its hand at movie making with 2016's "Max Steel" and it did very poorly at the box office.
An investment in Mattel comes with a few problems. As we alluded to earlier, the company's revenue has been decreasing the last four years and the last four quarters. In 2017 the company reported negative free cash flow and negative net income. According to E-trade, for the trailing twelve months, Mattel's return on equity, return on assets, and return on invested capital are all negative.
When it comes to a Mattel investment there really isn't much to bank on as an investor. There is no indication that the company will be able to increase revenue by selling more toys. There is no guarantee that their first movie is a box office hit (studio's have attempted to produce a Barbie movie for years, yet none have been able to do it).With that said, we like the direction the company is pursuing. A Barbie movie and He-man movie are long over due. If kids are playing with iPads instead of toys, give them your movie to watch on the iPad.
What are your thought's? Is a Mattel a buy, a sell, or a hold?