How ELMO Help You Make Profit Investing Mattel?

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Dec 21 2006
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With a lot of giggling of their own, Good Morning America host Diane Sawyer and her colleagues unveiled the newest model in Mattel’s (NYSE : MAT, quote) long-running Elmo franchise. The new T.M.X. Elmo laughs, slaps its knee, and rolls around on the floor before righting itself. “Again,” it says. Already dozens of the new dolls are being offered for sale on eBay (Nasdaq : EBAY. quote) for as much as $93.99, more than twice the toy’s $39.99 list price.
There was a long queue at Times Square Toy “R” Us store prompted it to open an hour earlier than usual. The store sold out of its initial stock in two and a half hours, as cashiers in red Elmo T-shirts busily rang up sales. This year, Mattel refused to reveal Elmo’s latest trick until the day the doll went on sale. To build buzz for the toy’s 10th anniversary, boxes of the T.M.X. Elmo were shipped the night before to retailers—most of which had agreed to buy it sight unseen.

Toymakers and retailers love frenzy-inducing items because they bring more traffic into stores and lift sales of other products. “There’s a halo effect across everything,” says Neil Friedman, president of Mattel Brands. Friedman knows what he’s talking about: He released the first Tickle Me Elmo at Tyco Toys, which Mattel later acquired. The first Elmo became a toy biz phenomenon after it launched in 1996. But the industry hasn’t seen a breakaway hit product like that since the fuzzy Furby doll craze in 1998.

Mattel hopes to change that with the latest version of its ten-year-old Elmo. The company is helping fuel a new Elmo frenzy by manufacturing fewer than it normally would, says Jim Silver, co-publisher of Toy Wishes, an industry trade publication. He estimates that the company is making about one-third fewer than its usual run of about 1.5 million Elmos. That has retailers champing at the bit. “I have never seen the item,” says Robert Weinberg, senior vice-president for merchandizing at retailer KB Toys. “We really want a lot more.” Here’s a look at some other toy crazes over the years, from Hula-Hoops to Pokémon.

Everyone is looking for this Elmo but the trick of lower production and secrecy about the toy’s ability makes it a success for this holiday. This will definitely bring superb revenue to Mattel for the coming quarter. Mattel is one of my favorite stocks which made good money for me during the last quarter pre-earning announcement. Mattel will be announcing its next quarter earning on Jan-29-2007 (BMC) and I’m pretty sure this stock will not disappoint me.

# TIP: Consider the Call Option with sufficient time-value to make some descent profit on this guy and have a good laugh on the way to the bank like the Elmo.

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