What happened
Shares of toy maker Mattel (MAT 2.60%) jumped as much as 11.5% in trading on Wednesday after the company announced a long-term agreement with Disney (DIS 3.27%). Shares held strong gains through midday and are up 8.7% at 12:30 p.m. ET.
So what
Mattel has agreed to a multi-year global license for Disney Princess and Frozen franchises. This will give the company the right to create lines of toys, games, and books based on these characters.
Image source: Getty Images.
This is a significant announcement because Mattel had lost the rights to these characters to Hasbro in 2016. Mattel said it will launch products to retailers in early 2023.
Now what
It's not entirely clear what the financial impact of this deal will be on Mattel, but you can see that revenue slid from 2014 through 2020, partially because of the loss of the Disney license.
MAT Revenue (TTM) data by YCharts
I see this as an incremental positive and it's understandable that the stock is up today. But investors will want to watch how both revenue and margins are impacted by this agreement. There's no question it should help revenue, but Disney drives a hard bargain and given the competition I wouldn't be surprised if margins are low on Disney products. Today, that's something investors don't care about now that Disney is back with Mattel.
