Can ELMO Make MATTEL's Stock Laugh Next Monday?

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Jan 26 2007
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Firstly, I mentioned yesterday that Illumina, Inc. (Nasdaq: ILMN, stock) will announce its’ earning today, Friday Jan-26-2007 before market open but seems it was an unconfirmed date and Briefing noted Illumina has postponed it to Jan-30 before market but this date is still unconfirmed. Florida Rock Industries, Inc. (NYSE: FRK, stock) also announced its’ postponement of earning announcement scheduled earlier on Thursday, Jan-25-2007, to an unconfirmed date on Feb-1-2007.

Toy maker Mattel Inc. (NYSE: MAT, stock) reports earnings for the fiscal fourth quarter on Monday, Jan-29-2007 (confirmed). Mattel, the maker of Barbie, Fisher-Price and Hot Wheels toys, has, along with other toy makers, faced pressure as the popularity of electronics and video games have displaced demand for traditional toys. But Mattel has fought back with big sellers such as TMX Elmo.

In December, Mattel said sales of Barbie, which have slumped in recent years, were up for the year, and a survey by the National Retail Federation found that Barbie was the top toy for girls during the holiday season. Mattel’s TMX ELMO was the top toy for boys.

Thompson Financial estimate Mattel to post net income of 67 cents per share on revenue of $1.99 billion. Analysts generally expects Mattel do deliver the best fourth-quarter results of all the toy makers, with TMX ELMO, Dora the Explorer, and “Cars” toys performing well.

Rating Indicators for MAT:

  • Wall Street consensus : 0.67
  • StockScouter rating : 9 / 10
  • Whisper Number for this stock : 0.68
  • Schaeffer rating for this stock : 7 / 10
  • Power Rating : 5 / 10
  • Insider Trading (last 52 weeks) : ($9.80M)
  • Zacks Analysts Rating: Hold
  • Option Trading: Apr 2007 25 Call
  • Implied Volatility (IV) for Mar 2007 $25 Strike : 24.83%

Sales, Income & Growth – For the past 12-months, Mattel registered $5.38 Billion sales from the industry’s $3.9 Billion. Income amounted to $585.73 Million from the industry’s $381.33 Million.

Profitability & Financial Health – For the past 12-months, net profit margin is in the region of 10.9% against industry’s 7.9%. Mattel has a debt/equity ratio of 0.41 compare to industry’s ratio of 0.40.

Stock Resistance & Support Level – The resistance is at $24.08 (52-week high) while the first level support is at $22.91 (50-day moving average).

Risks – For a large company like Mattel, its’ stocks are neither being accumulated heavily nor sold heavily by financial institutions.

This stock has beaten earning estimates most of the time and December generally is the peak season for toys. Mattel stock also made me some money during the last quarter’s earning. I believe the ELMO sold-out during the 2006 Christmas period would help the earning figure when Mattel announce next Monday. However this round I plan to join the crowd of out-of-money Apr 2007 25 Call. If you noticed the $25 Strike for Feb, Mar and April, you’ll noticed this 25.00 Call were being bid-up with such a high volume. Interesting isn’t it? Maybe the crowds already knew something about Mattel.

Elmo was so popular that it was being offered for sale on eBay (Nasdaq : EBAY. stock) for as much as $93.99, more than twice the toy’s $39.99 list price. Perhaps the new T.M.X. Elmo will laughs, slaps its knee, and rolls around on the floor next Monday with a set of good result.

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