What happened

Shares of Mattel (NASDAQ:MAT) jumped on Monday after an analyst reiterated his buy rating on the stock. This comes a few days after Mattel announced its first-quarter report, which featured double-digit sales growth for both Barbie and Hot Wheels. As of 11:25 a.m. EDT, the toymaker's shares were up 4%.

So what

Analyst Gerrick Johnson of BMO Capital maintained his buy rating on Mattel stock, along with a price target of $20. Shares of Mattel haven't breached the $20 mark since mid-2017.

A Mattel Hot Wheels set.

A Mattel Hot Wheels set. Image source: Mattel.

Shares of Mattel have tumbled over the past five years as the company struggled with slumping sales and profits. Mattel's first-quarter report was mixed: Revenue fell less than expected, but the bottom line came in well below the average analyst estimate. A 24% surge in Barbie sales and a 15% increase in Hot Wheels sales helped offset weak demand for Mattel's other brands. Excluding the impact of the Toys R Us bankruptcy, Mattel saw its first-quarter global gross sales grow by 2% year over year.

One reason for the buy rating may be Mattel's valuation. While the company is currently unprofitable, the stock's price-to-sales ratio is near its lowest level since the financial crisis nearly a decade ago. There are few things going right for Mattel at this point, but expectations are rock-bottom.

Now what

Mattel has a lot of work to do under new CEO Ynon Kreiz. The Toys R Us bankruptcy will hurt sales in the near term, as the retailer was one of Mattel's top customers. Once that issue is in the rearview mirror, Mattel will still need to boost demand for many of its brands, including American Girl and Fisher-Price.

With expectations so low, a surge to $20 per share isn't out of the question. But to produce long-term results for shareholders, Mattel will need to get the bottom line back into positive territory.