International Demand And Digital Integration Will Build Future Opportunity

Key Takeaways

• Expanding globally and diversifying into entertainment and digital experiences, Mattel is broadening revenue sources and enhancing brand relevance across age groups and cultures.
  
• Ongoing cost control, supply chain improvements, and innovative, socially conscious product launches are boosting margins and strengthening long-term profitability.
  
• Heavy dependence on a small set of legacy brands, digital competition, rising costs, and demographic shifts threaten Mattel's earnings while media diversification faces significant execution risk.

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.

• Strong international revenue growth (EMEA +8%, Latin America +5%, Asia Pacific +16%) driven by rising middle-class populations is expanding Mattel's addressable market, supporting both top-line growth and long-term earnings potential.
  
• The company is accelerating its entertainment and content strategy (Mattel Studios, 1–2 films/year starting in 2026, new animated and live-action franchises), creating high-margin, recurring revenue streams that enhance net margins through IP licensing and multimedia monetization.
  
• Ongoing investment in digital integration (OpenAI collaboration, self-published games in 2026, expanded Netflix partnership) positions Mattel to leverage the growing convergence of physical and digital play experiences, supporting future revenue growth and margin expansion.
  
• Sustained cost optimization (targeting $200 million in savings by 2026, realized $126 million to date) and supply chain diversification are expected to deliver sustainable gross margin and EBITDA margin improvement, directly benefiting future profitability.
  
• Increased innovation and product launches focused on inclusivity, cultural relevance (Barbie Type 1 Diabetes doll, adult collector products, broad price spectrum) are strengthening brand loyalty and positioning Mattel to capture growth in the expanding adult and socially conscious consumer base, supporting both revenue growth and premium pricing potential.

Mattel Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Mattel's revenue will grow by 2.7% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 9.9% today to 9.2% in 3 years time.
• Analysts expect earnings to reach $533.3 million (and earnings per share of $1.89) by about July 2028, up from $526.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.2x on those 2028 earnings, up from 10.7x today. This future PE is lower than the current PE for the US Leisure industry at 21.7x.
• Analysts expect the number of shares outstanding to decline by 4.82% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.61%, as per the Simply Wall St company report.

Mattel Future Earnings Per Share Growth

Risks

• Mattel's prolonged reliance on a few key brands-especially Barbie, Hot Wheels, and Fisher-Price-was evident as Dolls (primarily Barbie) declined 19% due to fewer product launches and lower retailer promotional support; this concentration increases risk of revenue volatility if consumer sentiment shifts or if these brands experience fatigue, directly threatening long-term revenue stability and earnings.
  
• The company continues to face secular industry headwinds from digital entertainment, as growth was driven by categories like action figures and vehicles, while core Infant, Toddler, and Preschool (down 25%) and even the Dolls segment underperformed; if the shift to digital-native platforms and products accelerates, Mattel could see sustained softness in traditional toy demand, pressuring revenue and margins.
  
• Mattel's exposure to rising input costs-particularly tariffs, supply chain disruptions, and inflation-was highlighted throughout the call, with cost mitigation actions only partially offsetting anticipated impacts (over $100 million in tariff-related exposure cited for 2025); persistent cost pressures could erode gross and operating margins if pricing power is limited or if further cost escalation occurs.
  
• Declining birth rates in developed (core) markets, allied with noted sales declines in Infant, Toddler, and Preschool categories, point to structural long-term demand risks for Mattel's legacy business; unless growth in emerging markets, adult collectors, or new entertainment ventures materially outpaces these declines, total addressable market contraction may constrain top-line and profit growth.
  
• The company's transformation into a media and entertainment platform brings considerable execution risk; delays or underperformance of movie releases (e.g., Mattel Studios' pipeline doesn't materialize or box office reception is weak), slow adoption of digital games, or licensing fee inflation could result in missed high-margin growth opportunities, further impacting both revenue diversification and net earnings expansion.

Valuation

• The analysts have a consensus price target of $24.917 for Mattel based on their expectations of its future earnings growth, profit margins and other risk factors. 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 $21.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $5.8 billion, earnings will come to $533.3 million, and it would be trading on a PE ratio of 16.2x, assuming you use a discount rate of 7.6%.
  
• Given the current share price of $17.41, the analyst price target of $24.92 is 30.1% 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.