What Happened?
Shares of toy manufacturing and entertainment company (NASDAQ: MAT) fell 12.4% in the afternoon session after the company reported weak second-quarter financial results and cut its annual forecast for both sales and profit.
The company's revenue declined 6% year-over-year to $1.02 billion, falling short of analyst estimates. This drop was largely due to a 16% decrease in North American sales, which Mattel attributed to changes in retailer ordering patterns. Consequently, the company lowered its full-year guidance. It revised its net sales growth forecast to a range of 1% to 3% and reduced its adjusted earnings per share (EPS) outlook to between $1.54 and $1.66. While Mattel's quarterly adjusted EPS of $0.19 surpassed expectations, this positive point was overshadowed by the revenue miss and the trimmed full-year outlook.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Mattel? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Mattel’s shares are not very volatile and have only had 8 moves greater than 5% over the last year. Moves this big are rare for Mattel and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 6 months ago when the stock gained 16.5% on the news that the company reported fourth-quarter results that significantly exceeded analysts' EPS and EBITDA expectations. Revenue also exceeded expectations, though by a narrow margin, as sales increased 1.6% year-on-year. Additionally, its revenue and full-year EPS guidance outperformed Wall Street estimates. Zooming out, we think this was a good quarter with some key areas of upside.
Mattel is down 1.3% since the beginning of the year, and at $17.50 per share, it is trading 20.2% below its 52-week high of $21.94 from February 2025. Investors who bought $1,000 worth of Mattel’s shares 5 years ago would now be looking at an investment worth $1,543.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
