What happened
Week to date, shares of Mattel (MAT -0.60%) were down by 13% as of 9:50 a.m. ET on Friday, according to data provided by S&P Global Market Intelligence.
The weak macroeconomic backdrop over the holidays caused Mattel's turnaround to take a detour. The company delivered fourth-quarter results earlier this week that were below analysts' consensus estimates. Management also expects continued weakness in consumer spending in 2023, but there's still more upside here as it executes its turnaround plan.
So what
The toy maker's stock has more than doubled since hitting bottom at the start of the pandemic in 2020. Management's turnaround strategy, which includes cost-cutting measures and efforts to improve revenue growth, has gone to plan so far, but the soft consumer spending environment proved too much for the typically resilient toy industry during the holidays.
On the bright side, Mattel saw healthy demand recently for Monster High, which was the No. 1 relaunch property within the dolls category in the fourth quarter. But total Barbie sales were down significantly in the quarter, as were sales for its Fisher-Price and Thomas & Friends lines.
On a constant-currency basis, revenue was up 3% in 2022, but down 19% year over year in the fourth quarter. Over the last three years, Mattel has more than doubled its quarterly revenues, and that growth has helped lift the stock price by 80% since 2020. Once the company returns to growth, there could be more upside.
Data by YCharts.
Now what
Mattel is still headed in the right direction. It obviously can't control the economy, but investors should look at any dip in the share price this year as a great buying opportunity. Following its sell-off this week, the stock is trading at an attractive valuation of just 12 times estimated 2023 earnings.
