OpCo Sees Mattel's (MAT) Pipeline Expanding from Recent Movie Shuffle at Disney (DIS)

Shares of Mattel (NYSE: MAT) have struggled over the last two years, dropping 60% from $48 in January of 2014. Despite the terrible looking chart, Oppenheimer analyst, Sean McGowan, reiterated his Outperform rating on the stock and thinks visibility could be improving. Walt Disney (NYSE: DIS) recently announced its film schedule through 2020 and included a date for the Cars sequel. OpCo realized this incremental opportunity and believes Mattel is likely to be a beneficiary from the sales of die cast vehicles and other Cars products. The revenue bump occurs in the year that the film is released but it will also continue for subsequent years. This should provide additional visibility into 2018 when Toy Story 4 is scheduled to be released.

There has been concern that the relationship with Disney is in jeopardy as Hasbro (NYSE: HAS) recently announced that it will be making the Disney Princess and Frozen dolls in 2016. These had been important product lines for Mattel since the strength of Frozen dolls was offsetting the weakness in the traditional Barbie franchise. The fact that Mattel has the rights to Toy Story 4 indicates that this was not a bigger shift away from the toy maker but an attempt to diversify among Disney partners.

The combination of the incremental Cars opportunity and the stability of Toy Story offers improved visibility for Mattel in the coming years, however OpCo is keeping its estimates unchanged. Since there is already an Outperform rating on the stock, a ratings upgrade may not be in the cards but it is clear that a downgrade is off the table as well.

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