Profit While Playing in Mattel (MAT)

Monster High dolls mean monster profits for MAT

   

If you are all acquainted with popular music, then you’re likely familiar with the classic rock hit song “American Girl” by Tom Petty. Now, I’m not sure if this song was the inspiration for Mattel (NYSE:MAT) when they came out with their huge selling American Girl line of dolls, but whatever the inspiration, American Girl dolls have been a big hit when it comes to sales. In fact, Mattel’s mainstay doll brand, Barbie, has taken a back seat in terms of sales growth to American Girl, and to the more alternative line of dolls called Monster High.

Now, I don’t usually play with dolls, but given the big boost in Mattel’s Q1 revenue from American Girl and Monster High, I think it might be time to start playing with MAT.

On Wednesday, the company reported Q1 net income of $38.5 million, or 11 cents per share. That’s a strong move higher from the $7.8 million, or 2 cents per share, in the same quarter a year ago. Wall Street was only expecting EPS of 8 cents. Revenue also was stronger, jumping 7% to $995.6 million from $928.4 million. Expectations were for a top line of $984.2 million.

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In a post-earnings conference call with analyst, Mattel Chairman and CEO Bryan Stockton told analysts, “I’m very happy with our financial performance in the quarter and I feel we’re building on the momentum we generated at the end of 2012 to position us for a successful execution in this year’s all-important holiday season.”

I suspect Stockton’s comments are on the mark here, and for traders, that could mean more upside in MAT for the remainder of 2013.

Technically speaking, MAT shares trade just below their all-time high, so there’s virtually no resistance confronting the shares. And while the stock has enjoyed a near 20% run higher year to date, I suspect that there’s more upside to come in the months ahead.

So, if you’re looking to play around with a stock that could climb 10-15% over the next three-to-six months, then playing with dolls just might be a great bet.

 

At the time of publication, Jim Woods did not hold a position in any of the stocks mentioned here.


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