What happened
Shares of Mattel (MAT -0.66%) dropped on Tuesday after the toy maker was downgraded by UBS. Fears of a full-blown trade war could also be playing a role. Mattel stock was down about 5.3% at 12:35 p.m. EDT.
So what
UBS downgraded shares of Mattel on Tuesday to neutral, replacing a previous buy rating. UBS kept its price target at $17 per share, so the downgrade appears to be due to Mattel's rally over the past few months. Prior to Tuesday's slump, Mattel stock was up nearly 30% over the past three months.
Image source: Getty Images.
Also in the mix is the escalating trade situation between the United States and China. President Trump threatened to slap tariffs on an additional $200 billion of Chinese goods, a move that will almost certainly be met with some form of retaliation. Mattel has manufacturing facilities in China, and sales in the Asia-Pacific region totaled $547 million in 2017, about 11% of the company's total revenue.
Now what
The double-digit gains for Mattel stock over the past few months have not been related to the company's performance. During the first quarter, global net sales dropped 4% year over year, while adjusted operating loss expanded to $160.5 million. That's down from a loss of $120.7 million during the prior-year period, even after excluding the negative impact of the Toys "R" Us bankruptcy and other one-time items.
Mattel's recent strong performance seems to be a case of the stock bouncing off lows not seen since the financial crisis nearly a decade ago. For the stock to continue moving higher, the company needs to start showing signs of improvement.
