It’s the summer of Barbie. But can the same be said for Mattel shares? Such is the question analysts on Wall Street have been contemplating in the runup to this weekend’s highly anticipated release of Warner Bros. Discovery ‘s movie based on the iconic doll. There’s a lot at stake for Mattel, as the toymaker attempts to prove it has a Disney -like ability to turn its intellectual property into a sales-boosting powerhouse. There are clear signs of a rising, hot-pink tide. More than 100 brand partnerships are hawking products from Barbie-inspired apparel to weighted blankets. A turning point for Mattel? Gordon Haskett analyst Don Bilson was quick to note that the movie, which is directed by Greta Gerwig and stars Margot Robbie and Ryan Gosling, is not an ordinary project for Mattel. The toymaker is hoping to prove it can turn its IP into successful movies that will then boost merchandise sales and its share price. And he noted the potential floodgate effects. If Barbie’s a success, it will further legitimize Mattel’s plans to put other brands on the big screen. “Beyond Barbie, it has thirteen other film projects in various stages of development, and it figures that Barbie’s success, or lack thereof, will play an important role in how Wall Street appraises that opportunity,” Bilson said. This potential turning point is reminiscent of Lions Gate as it prepared to release the first “Hunger Games” movie, he said. That movie marked the studio’s attempt to prove it could go beyond the horror flicks it was then known for and develop a mass market franchise. In the three weeks preceding the movie’s release on March 23, 2012, the stock jumped from around $13 to as much as $16 — a more than 20% jump. Lions Gate’s stock had already performed well in January and February 2012, climbing 21% and 35% in each month, respectively, but the stock did give up some of its gains in April as investors assessed the reaction to the film. Ultimately, Lions Gate shares tallied a 97% gain for the year when it closed out 2012 at $16.39. Mattel stock is up more about 19% on a year to date basis after a mixed start to the year. The average analyst holds a buy rating with an average price target that implies another 6.6% upside over the next year, according to Refinitiv. Into the Barbie release, the stock reflects the growing buzz. Mattel shares moved from $17.59 on June 1 to breaking into the $20 range for the first time since February. The stock ended Thursday’s session at $21.27. That amounts to more than a 20% gain since the start of June. Although Mattel’s stock has been outperforming its rival Hasbro , it has a long way to go to catch up to its market value, Bilson said. Mattel’s valuation hasn’t bested Hasbro since 2016. Goldman Sachs analyst Stephen Laszczyk, however, said in a note to clients that the movie is playing a role in helping increase investor optimism. He reiterated his buy rating on Mattel and neutral rating on Hasbro. MAT HAS mountain 2013-07-20 Mattel and Hasbro over the last decade Opinions have improved on the Barbie brand, D.A. Davidson analyst Linda Bolton Weiser said to clients this week. She was referring previous criticism that the brand didn’t evolve with society. She expects there is a long-term opportunity if the IP-to-movie experiment proves successful given the high margins in the licensing space. But Bolton Weiser said the company has already told investors to expect a sales rebound this year, meaning a post-movie boost would hardly be a surprise. “MAT’s 2023 guidance already builds in a ‘hockey stick’ sales recovery in 2H23, and we don’t have visibility on what could cause MAT to greatly exceed the guidance, therefore we are not super pounding the table here on the stock,” she said. “But our long-term thesis is unchanged, in that MAT has much opportunity to unleash the value of its IP.” Shares of Warner Bros. Discovery, the parent of the studio behind “Barbie,” are up 38% this year. Analysts believe that rally could have more steam ahead, with the average price target implying further upside of more than 54%. Goldman Sachs analyst Brett Feldman named the stock his top pick in the media sector earlier this week. The ‘Barbie’ cottage industry Movies based on toys usually help short-term sales. Though Barbie is not a typical film in the space given its adult audience, Jefferies analyst Andrew Uerkwitz said, it can still help Mattel sales incrementally. It also has the potential to bolster an affinity to the brand for a younger generation, he said. Other companies with movie-specific partnerships or Barbie-themed products could also benefit. Roth MKM analyst David Bellinger pointed to Five Below as one example. His recent inventory checks showed more Barbie-themed merchandise at the discount retailer. Bellinger said it may be evidence that Five Below is leaning more heavily into movie-themed merchandise. Earlier this year, it saw a boost from Universal Pictures’ “The Super Mario Bros. Movie.” Five Below stock is up nearly 13% this year. “While not necessarily a kid’s movie with a PG-13 rating, Barbie could generate enough buzz via social media and other avenues to drive incremental traffic to FIVE and incremental spend in the process,” he said in a note to clients. If “Barbie” draws larger crowds than initially anticipated, it could help movie theaters, too. Analysts are watching Cinemark with interest, but have diverging expectations for its share performance. The stock is up more than 80% in 2023, despite a more than 5% decline so far in July. Morgan Stanley analyst Benjamin Swinburne said ramped up film supply can help the chain exceed expectations for a year that looks similar to 2022, though the Hollywood union strikes create some uncertainty longer term. Still, he reiterated his overweight rating on the stock this week in a note titled “Barbieheimer,” a reference to the shared release of both “Barbie” and Universal Pictures’ “Oppenheimer.” (Some people have shared plans online to see the movies back to back in theaters.) The “Barbenheimer” buzz may not be enough. Goldman Sachs analyst Stephen Laszczyk said the third quarter should bring in $1.9 billion for the domestic box office. That’s 4% lower than the same period a year ago and 34% below the third quarter of 2019. Only “Barbie” and the latest “Mission: Impossible” movie are expected to exceed $200 million in domestic box office sales in the third quarter, Laszczyk said. In other words, to riff on a slogan used in “Barbie” ads: She’s everything; he’s just “Oppenheimer.” JPMorgan analyst David Karnovsky downgraded Cinemark shares to neutral from overweight earlier this week, saying the big-name films may not be enough to mitigate impacts of the strikes. He warned actors honoring the picket lines and failing to market their movies could hurt box office performances for films slated for release in late summer or early fall if the work stoppages have not ended. “Absent a resolution, we expect the strike will remain an overhang to CNK shares and limit upside,” Karnovsky said, “regardless of whether the box office outperforms near term (e.g., Barbie and Oppenheimer) or the company posts better than expected results.” Discloser: NBCUniversal is the parent company of CNBC and Universal Pictures. It is also a member of the Alliance of Motion Picture and Television Producers, which has been bargaining with the now-striking Writers Guild of America. — CNBC’s Michael Bloom contributed to this report
