Morgan Stanley downgrades Mattel, sees downside to consensus estimates

(Updated – January 17, 2024 8:23 AM EST)

Morgan Stanley downgraded Mattel (NASDAQ:) to Equal Weight from Overweight in a note Wednesday, cutting its price target for the stock to $19 from $25 per share.

Analysts said in a note covering the leisure sector that they continue to be selective, looking for earnings achievability and/or idiosyncratic catalysts.

“Overall, we see many cross currents to consider in ’24 with slowing wage growth, the lagged impact of rates, and waning excess savings portending continued pressure on discretionary spending, according to Morgan Stanley economists,” the analysts noted.

“The topline environment is likely to remain challenging at least through the 1H for many, with easing compares and potential rate cuts providing hope for improvement in the 2H but visibility generally remaining low, in our view.”

Focusing on MAT, the analysts explained that they have decided to downgrade the stock given the downside risk to consensus estimates.

While the bank acknowledges they may be somewhat priced in, they believe “limited near-term upside growth drivers suggest [the] stock could remain range-bound.”

“We remain constructive on the company’s ability to diversify its growth drivers by way of its strong IP over the long term, but we are moving to the sidelines for now as we see downside to consensus estimates on a tougher category outlook in ’24 while we think the market will need to see further proof of a structural step-change in the earnings power of the business before ascribing a premium multiple,” the analysts explained.