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Why Mattel Stock Gained 14% Last Month

By Jeremy Bowman - Jul 9, 2019 at 11:49PM

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It was a busy month for the toy maker.

What happened

Shares of Mattel ( MAT -2.42% ) had another bumpy ride in June, but in the end, the toy maker stock finished up 14% according to data from S&P Global Market Intelligence.

Mattel received and then rebuffed a merger offer, disappointing investors in the end, and gained on a new licensing deal as signs pointed to a thaw in trade tensions.

A Barbie doll with props

Image source: Mattel.

It was a volatile month for the stock, as it was up nearly 24% at one point, but the stock nonetheless held on to most of those gains.

MAT Chart

MAT data by YCharts

So what 

Mattel shares surged 12% on June 4, after the company announced a new international licensing agreement with Sanrio, maker of Hello Kitty products. According to the deal, Mattel will "design and develop" a wide range of products, including toys, dolls, and games. That same day, the company said it was partnering with studio Blumhouse Productions to make a movie based on the Magic 8 Ball. The tie-ups shows that Mattel can still find new growth avenues despite the many challenges it's facing. 

The following week, the stock popped again on news that the company had rejected a second takeover bid from MGA Entertainment, the maker of the LOL Surprise dolls, as Mattel's board concluded the deal was not in the company's best interest. 

A week later, Mattel gave up those gains and then some as MGA CEO Isaac Larian said he was giving up on the deal, and attacked Mattel, saying the company "could not be salvaged at this point." He also criticized Mattel's "hostile board and management." 

Finally, the stock made gains in the last week of June as investors hoped that trade tensions with China would ease when President Trump met Chinese President Xi at the G20 summit that weekend. As a struggling company dependent on Chinese imports, Mattel is highly sensitive to the trade situation.

Now what 

Though Mattel rejected the buyout offer from MGA, the company still faces plenty of challenges, including an outsize debt burden, a recall of a Fisher-Price baby sleeper, and a changing toy industry as Toys R Us has gone out of business and kids increasingly prefer screens over classic toys.

Nonetheless, Mattel has a stable of valuable intellectual property, including Barbie and Hot Wheels, and has been cutting costs to turn the business around. We'll learn more when the company reports second-quarter earnings on July 25, but don't expect any quick fixes.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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