Barbie Hot Wheels And Fisher-Price Will Spark Digital Entertainment Expansion

Key Takeaways

• Mattel is leveraging its iconic brands to expand into entertainment, digital products, and new demographics, creating higher-margin and recurring revenue streams.
  
• International expansion, operational efficiency, and a focus on sustainability are strengthening resilience, broadening the customer base, and supporting long-term profitability.
  
• Heavy reliance on aging brands and physical toys, digital transformation challenges, industry headwinds, and retailer pressures threaten Mattel’s growth, margins, and long-term competitiveness.

Catalysts

A toy and family entertainment company, designs, manufactures, and markets toys and consumer products in North America, Latin America, Europe, the Middle East, Africa, and the Asia Pacific.

• Mattel’s entertainment-centric growth strategy leverages its highly recognizable brands—such as Barbie, Hot Wheels, and Fisher-Price—into movies, TV series, digital games, and live events. With 16 films in development or production, expanded Netflix and MAX content, and a self-publishing digital game launch planned, Mattel is poised to diversify revenue beyond traditional toys and generate higher-margin licensing and recurring earnings streams.
  
• Expansion in international markets is expected to become a larger growth engine, supported by a rising global middle class and greater disposable incomes, particularly in Asia-Pacific (which grew double digits last year) and EMEA. This broadens Mattel’s addressable market and is likely to fuel top-line revenue growth for years to come.
  
• Ongoing supply chain diversification and operational excellence position Mattel to absorb macro shocks and capitalize on future industry disruptions. Efforts to optimize sourcing across seven countries and advanced cost-saving initiatives have already widened gross and operating margins, with $60 million in additional cost savings expected in 2025 and a long-term goal of $200 million by 2026. This creates lasting improvements in profitability and resiliency.
  
• Mattel is investing in capturing new demographic segments, highlighted by the rising “kidult” and adult collector trends and the integration of physical and digital products (such as smart toys and augmented reality experiences). Initiatives like adult-focused products, new partnerships, and collector exclusives underpin premium pricing and drive multi-generational engagement, supporting both higher average selling prices and sustained unit growth.
  
• Growing consumer demand for sustainability and eco-friendly products—particularly from millennial and Gen Z parents—presents an opportunity for Mattel to expand its sustainable product offerings. As Mattel further differentiates itself on this front, it stands to increase market share and enhance brand loyalty, reinforcing revenue growth and supporting gross margin due to premium positioning.

Mattel Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Mattel compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Mattel's revenue will grow by 2.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 10.1% today to 10.2% in 3 years time.
• The bullish analysts expect earnings to reach $593.8 million (and earnings per share of $1.99) by about April 2028, up from $541.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 17.7x on those 2028 earnings, up from 9.4x today. This future PE is lower than the current PE for the US Leisure industry at 18.7x.
• Analysts expect the number of shares outstanding to decline by 4.04% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.1%, as per the Simply Wall St company report.

Mattel Future Earnings Per Share Growth

Risks

• The continued decline in total point-of-sale (POS) and net sales in categories such as Dolls and Infant, Toddler and Preschool, paired with a lackluster industry outlook that is only “comparable to slightly up,” suggests secular slowing of demand in traditional toys due in part to increased digitization and shifting child preferences, which could lead to ongoing revenue stagnation or contraction.
  
• Mattel’s overreliance on a core set of legacy brands, particularly Barbie and Hot Wheels, leaves the company vulnerable to brand fatigue and product cycle volatility; the 12% decline in Barbie gross billings and the company’s need to lean heavily on licensed movie releases for category growth indicate risk to both long-term sales and earnings resilience.
  
• Although investments in digital gaming and entertainment are highlighted, challenges around successful digital transformation remain, with incremental costs in SG&A for self-publishing and no clear evidence yet that digital can offset secular pressures on physical toy demand—potentially impacting both net margins and long-term growth prospects.
  
• Persistent industry headwinds such as cost inflation (labor, logistics) and new tariffs on imports from China, Mexico, and Canada create uncertainty; while the company touts supply chain diversification and mitigating actions, any inability to fully offset these cost increases may erode gross margins and operating income, especially in a value-conscious consumer climate.
  
• The trend of elevated retail inventories and the risk of slowing sell-through, as well as ongoing consolidation among major retailers, could limit Mattel’s pricing power and shelf space, threatening both unit sales and bargaining power; if unsold inventory rises, it may result in future margin pressure and weaker free cash flow.

Valuation

• The assumed bullish price target for Mattel is $30.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Mattel's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $30.0, and the most bearish reporting a price target of just $16.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $5.8 billion, earnings will come to $593.8 million, and it would be trading on a PE ratio of 17.7x, assuming you use a discount rate of 7.1%.
• Given the current share price of $15.75, the bullish analyst price target of $30.0 is 47.5% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.