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Why Shares of Mattel Are Surging Today

By Timothy Green – Updated Apr 14, 2019 at 10:56PM

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The toy maker's stock is erasing some of its 2018 losses.

What happened

Shares of Mattel (MAT -0.66%) were up 8.5% as of 12:15 p.m. EST Monday. A licensing agreement announced on Sunday with BTS, a South Korean boy band, may be driving some of the gains. But that news seems relatively minor. Instead, Mattel stock may simply be bouncing back a bit after a brutal December.

Check out the latest Mattel earnings call transcript.

So what

Under the BTS multicategory licensing agreement, Mattel will create dolls, collectible figures, games, and other products based on the popular boy band. Mattel recently lost licensing rights for some DC Comics toys, so a new licensing agreement is certainly good news. This move is unlikely to move the needle for Mattel on its own, but it could be a sign that the company is getting more aggressive in its pursuit of licensing deals.

A rising blue and orange chart

Image source: Getty Images.

Monday's rally may have more to do with the steep sell-off in December than with the BTS agreement. Shares of Mattel, already down considerably in the past few years, shed 28% of their value in the last month of 2018. While a broad stock market plunge was to blame, Mattel dramatically underperformed.

The jump in the stock price on Monday follows a similar rally last Friday.

Now what

Mattel has been in turnaround mode for years. The company has been churning through CEOs, with Ynon Kreiz taking the helm in April of last year. Mattel's results have been poor, and the bankruptcy of Toys R Us has only made things worse. Net sales in the third quarter plunged 8% year over year, hurt by Toys R Us and a slowdown in China.

With UBS reporting that U.S. toy sales tumbled by a high-single-digit percentage in the fourth quarter, Mattel's holiday results are unlikely to impress. While investors are no doubt celebrating the recent surge in Mattel's stock price, the company has a lot of work to do to get itself back on the right track.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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