Novice Investing - Don't Tell Mattel How To Sell

Date: Monday 01st 2008f December 2008 03:27:01 PM

Don't Tell Mattel How To Sell - 10/17/2006

By: Novice Investing Staff

What a difference a year makes. One year ago, we reported Mattel horrible earning figure as it battled privately held MGA Entertainment. At the time, we blamed high oil price for Mattel failure. That is akin to blaming the weatherman for getting late to work.

At the time, analysts blame Mattel's weakness to Barbie's sales which plunged 30% in the US. Last year's result was helped by its educational toy division, Fischer-Price, which record a 6% revenue gain. This time, Barbie sales rose 4% from a year ago and overall sales 7% for the company. As a result, Mattel predicts a strong holiday season for 2006.

We have said it last year that Mattel was profitable and has a decent balance sheet. What has changed since then? On December 31st 2005, Mattel spotted a positive net cash of $ 450 Million. On June 2006, positive net cash are negative $ 200 Million. How about profit? For all of 2005, Mattel earned $ 1.10, while for 2006, it is expected to earn $ 1.24. Not much exciting change, isn't it? Meanwhile, stock price increases 40% to $ 21 recently. As you see, the market is irrational here. They think what they want and when the news seem gloomy is one of the best time to buy a stock. (After a thorough research, of course)

However, if you look at Mattel closely, it seems like share price will never register a 1000% gain ala Apple Computers (AAPL). It looks like a cyclical play depending on the kind of toys it offered during particular year. Last year, Barbie was a drag. This time, it is not a star performer, but saves Mattel from having a terrible year. Thus, for Mattel, the best you can do is to analyze it when it is down and predict when Mattel stock will turn around.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Mattel Corp. (MAT) or any other securities.

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