Ross HealyMattelMATCOMMENTMay 08, 2015

They had a mixed quarter: a slight revenue miss, but a strong earnings beat due to great gross margins. However, management lowered the revenue outlook, raised gross margins outlook and left the earnings guidance unchanged.

Reported very good numbers tonight, but guidance was conservative. That's why shares traded down. It beat earnings and revenues in Q3.

They just delivered sub-optimal numbers. Suffered supply chain shortages last year. Maybe there was less demand after Covid? We knew things were bad when they pulled their forecast last October. Q4 revenue was down 22% YOY and an 11-cent earnings miss. Their latest full-year forecast is weaker.

Not too long ago this company was on their short list. They are in trouble. They blown up their balance sheet and the returns are terrible. Hasbro (HAS-Q) has put up a potential bid out there and it would make a lot of sense. Your best hope is that buyout. It’s too risky. Maybe they will just wait for them to go bankrupt and pick the assets. They are really not in great shape.

(A Top Pick Feb 9/17. Down 38%.) This has been a dog this year. One problem is e-commerce on big box stores. Also, they have new management that is still trying to correct their brands and turn around sales. The new CEO is a former Google executive, and is bringing in a completely different attitude and vision to the toy industry. Barbie, American Girl and Fisher-Price have great brand power, and should and could be used better in a digital world where the company can earn more money.

Consumer discretionary is just ugly out there. It really needs to hold this level. EBV+3 is $15.03, and this closed at $15.57. His model price is only $15.81. This company needs a good Christmas season.

Has a small Short on this. It scores right at the bottom of the pack on price momentum. They are also at the bottom on valuation and volatility. An expensive stock trading at 3.2X. Had a big miss on earnings recently. The balance sheet is okay. Dividend yield of 3%.