Should I buy Mattel shares in January 2022?

Mattel, Inc (NASDAQ: MAT) shares have weakened more than 5% since the beginning of December 2021, and the current price stands at $20.3.

Mattel raised financial guidance

Mattel, Inc. is an American multinational toy manufacturing company that sells products in more than 150 countries.

Mattel has proven stability in challenging market conditions; still, shares of this company have weakened more than 9% in the last thirty days.

The company’s business made improvements throughout the third fiscal quarter, and Mattel reported strong results in October.

Total revenue has increased by 8% Y/Y to $1.76 billion, while the GAAP EPS was $2.29 (beats by $1.59).

Adjusted EBITDA for the third fiscal quarter was $463 million, and the company reported a net income of $813 million, which includes a non-cash benefit of $510 million resulting from the release of valuation allowances on deferred tax assets.

For the first nine months of the 2021 year, net sales have increased by 24% compared with the prior year’s first nine months.

The third-quarter earnings results showed that Mattel is moving in the right direction, and the company’s management raised financial guidance for the full fiscal year.

For the full fiscal year, net sales are expected to increase by 15% compared with the prior year, while adjusted EBITDA should be in a range between $900 million – $925 million. Ynon Kreiz, Chairman and CEO of Mattel, said:

We expect to grow for the balance of the year and have a strong holiday season. Our strength is foundational and broad-based, and we are on a clear path to improve profitability and accelerate top-line growth.

On the other side, the Coronavirus pandemic continues to pose downside risks together with the supply chains crisis, and if the situation gets worse, Mattel could have problems with the realization of all targets.

CEO Ynon Kreiz acknowledged an impact from supply chain bottlenecks, but he said that the company’s flexible logistics operation has allowed it to sidestep significant consequences.

CEO Ynon Kreiz also added that coronavirus, inflation, and the supply chain problems have compressed margins, but Mattel has a strong demand for its products and has been working through supply disruptions.

Mattel trades at less than nine times TTM EBITDA, the company is expanding its market share, and with a market capitalization of $7 billion, shares of this company are fairly valued.

Technical analysis Data source: tradingview.com

Mattel shares weakened more than 5% since the beginning of December 2021, and if the price falls below $18 support, the next price target could be around $16.

The strong resistance level stands at $24, and if the price jumps above this level, it would be a “buy” signal, and we have the open way to the $28.

Summary

Mattel has proven stability in challenging market conditions, and the company’s management raised financial guidance for the full fiscal year. CEO Ynon Kreiz said that coronavirus, inflation, and the supply chain problems have compressed margins, but the company’s flexible logistics operation has allowed it to sidestep significant consequences.

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