Mattel, Inc. (MAT) — This is one of the largest and best-known toy companies in the world whose popular brands include Fisher-Price, American Girl and Hot Wheels. But Mattel’s most iconic brand, Barbie, is struggling, with sales declining in the past eight quarters.
Weak Barbie sales and a stronger U.S. dollar were blamed for the company’s Q3 revenue and earnings miss when it reported Thursday after the close. Sales declined 11% year over year to $1.79 billion, falling short of the $1.89 billion analysts projected. Profits fell 33% in the quarter, with the company reporting adjusted earnings of 71 cents per share versus a consensus estimate of 80 cents.
Full-year revenue and earnings estimates are likely to be revised lower in coming weeks. The company pays a healthy annual dividend of $1.52 per share, for a current yield of almost 7%, but that could be in danger of a cut.
MAT stock double-topped in May 2013 and January 2014 at over $45 and has been in an extended downtrend ever since. This latest earnings disappointment, just prior to the ramp-up to holiday sales, was serious, and the stock’s technical failure targets a drop to the mid-teens.
Reversals at the bearish resistance line and 50-day moving average highlight the weakness of recent rally attempts.
Sell MAT stock short at $22 or higher with a downside target of $16 or lower for a potential gain of more than 25%. A stop-loss order should be entered at $24.
Be aware that if you hold shares short through the company’s ex-dividend date on Nov. 25, you will be responsible for paying the 38-cent quarterly dividend to the owner of the stock. And, as always, check with your broker for any other special requirements involved with shorting.
