- The "Barbie" movie could drive material upside for Mattel stock, according to Goldman Sachs.
- The bank increased its Mattel price target to $24 as estimates suggest more than $150 million in ticket sales this weekend.
- These are the three reasons why Goldman expects the movie to drive financial upside for Mattel.
Mattel stock is poised to benefit in a big way from the expected success of the "Barbie" movie, according to a Thursday note from Goldman Sachs.
The movie, starring Margot Robbie as Barbie and Ryan Gosling as Ken, is expected to beat Christopher Nolan's "Oppenheimer" and become the number one movie in America this weekend.
Domestic box-office forecasts for the "Barbie" debut range from as low as $75 million, which is a conservative estimate from producer Warner Brothers, to as high as $159 million, according to projections from BoxOffice Pro. The movie has positive reviews with a 90% rating on Rotten Tomatoes.
Mattel is set to benefit from the "Barbie" movie's success as a strong performance at the box office could translate into higher sales of Barbie products and lead the company to develop more content tied to its intellectual property.
Goldman Sachs raised its Mattel price target to $24, representing potential upside of 13% from current levels. These are the three factors that could help Mattel benefit from the potential success of the "Barbie" movie.
1. Licensing opportunities
While Mattel is set to collect licensing fees directly from the movie's box-office sales, it also has inked new licensing deals for various products that should help boost its licensing revenue.
"Mattel has engaged in dozens of partnerships that license the Barbie brand to popular consumer retail companies in order to elevate awareness and enthusiasm among consumers well beyond the traditional doll," Goldman Sachs analyst Stephen Laszczyk said. "We believe that Mattel is collecting licensing fees from each brand for the right to license the Barbie logo/imagery for their own products. We estimate that typical licensing fees of this nature range from 10% to 20% of product revenues."
2. Lower marketing costs for Barbie brand
"The enthusiasm around the Barbie film from both social media and the press has generated similar enthusiasm for these licensed consumer products, and consequently for the more classic Barbie toys Mattel sells directly. We believe this potentially reduces the need for Mattel to advertise its products in the near-to-medium-term," Laszczyk said.
3. Increased toy sales
The satirical nature and PG-13 rating of the "Barbie" movie suggest it is mostly targeting adults, not young kids, which means Mattel may not benefit from a big sales boost for its toys. But...
"We believe that toy sales will benefit from a 'halo effect' over the medium-to-longer-term as adults, who may gain a renewed affinity for the brand because of the movie, become more inclined to gift Barbie with the next occasion. As a result, we believe that it is more likely that Barbie's seasonal sales cycle is amplified as a result of the movie rather than altered by a near-term spike in demand," Laszczyk said.
A bonus reason exists for Mattel stock to benefit from the "Barbie" movie, and that's the possibility of Mattel licensing more of its intellectual property for content creation, according to the note. Mattel's Hot Wheels toy line already has a movie in the works, being produced by J.J. Abrams with an expected release date in 2025.