BofA Securities lowers Mattel stock price target to $27 on margin concerns

Mattel Inc. (MAT) reported Q2 2025 adjusted EPS of $0.19, exceeding BofA's $0.16 estimate, driven by a strong 51.2% gross margin from cost savings and product mix, despite missing revenue expectations at $1.02 billion and a 4% decline in gross billings. BofA Securities lowered its price target to $27 from $28 due to anticipated second-half gross margin headwinds and a slight downward revision to 2026 EPS, yet maintained its Buy rating, citing the company's valuation and content pipeline. UBS also maintained a Buy rating with a $29 price target, viewing Mattel's fiscal year guidance positively despite its tariff exposure.

Analysis

Mattel Inc. (MAT) delivered a mixed second-quarter 2025 performance, characterized by strong operational execution but top-line weakness. The company surpassed earnings expectations with an adjusted EPS of $0.19 against a $0.16 forecast, a beat driven by a robust gross margin of 51.2% which exceeded the Street's 50.3% estimate. This margin strength was attributed to the company's "Optimizing for Profitable Growth" cost savings program and a favorable product mix. However, this profitability was contrasted by a revenue miss, with sales of $1.02 billion falling short of the $1.06 billion consensus, and a 4% decline in gross billings. The company explained the billing decline as a timing issue related to a sourcing shift, which pushed some orders into the third quarter. Underlying demand appears modest, as point-of-sale data showed only a low-single-digit increase that was aided by an Easter timing shift. Analyst sentiment remains cautiously optimistic; both BofA Securities and UBS maintained Buy ratings, citing the attractive valuation (P/E of 10.9x) and a strong content pipeline. Despite this, BofA trimmed its price target to $27.00 from $28.00, anticipating gross margin headwinds in the second half of the year and slightly revising its calendar 2026 EPS estimate down to $1.78. UBS's positive view on the company's fiscal guidance is tempered by its acknowledgement that Mattel is highly exposed to potential tariffs.

Key Decisions for Investors

• Investors should monitor third-quarter results for the realization of the delayed billings and for evidence that gross margin strength can be sustained against the anticipated H2 headwinds.
• The current valuation at a 10.9x P/E ratio presents a potentially attractive entry point, but this must be weighed against the top-line revenue miss and underlying consumer demand softness.
• Given the company's significant exposure to tariffs, as highlighted by UBS, positions should be managed with close attention to developments in trade policy and its potential impact on cost structures.