Should You Buy Mattel as Growth Battles Margin and Execution Risks?

Mattel's discounted valuation and broader growth engines offer upside potential, but margin pressure and category weakness keep the outlook mixed.

Natasha Sharma

2 min read

Mattel, Inc. MAT offers investors a discounted valuation alongside improving sales momentum and a broader intellectual-property strategy. Second-quarter 2026 net sales rose 10% year over year, but profitability weakened as costs and strategic spending increased.

The decision therefore rests on whether stronger Vehicles, games and entertainment-linked demand can offset pressure in Dolls, preschool products and margins.

Mattel's Valuation Leaves Room for Upside

Mattel trades at 0.7X forward 12-month sales, below the Zacks sub-industry's 2.34X multiple and its five-year median of 1.17X. Its forward price-to-earnings multiple is 11.9X, adding another measure of a relatively restrained valuation.

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That discount gives the stock room to re-rate if operating performance improves. It also reflects real uncertainty, so valuation alone is not enough to establish a stronger buy case while earnings remain under pressure.

MAT Growth Engines Are Broadening Beyond Barbie

Vehicles gross billings rose 11% in constant currency in the second quarter, while Action Figures, Building Sets, Games and Other climbed 33%. Hot Wheels, UNO, Mattel163, licensed properties and entertainment-linked products are widening the sources of growth beyond Barbie.

The competitive backdrop is also broad. Hasbro, Inc. HAS operates across games, intellectual property and toys, including physical and digital experiences. Take-Two Interactive Software, Inc. TTWO develops and publishes interactive entertainment through businesses including Rockstar Games, 2K and Zynga, highlighting the digital engagement market Mattel is entering.

Mattel's Margin Recovery Faces a High Bar

Adjusted gross margin fell 260 basis points year over year to 48.6% in the second quarter. Tariffs, inflation, higher royalties and unfavorable foreign exchange more than offset benefits from Mattel163, tariff-mitigation actions and cost savings.

Management still expects adjusted gross margin of about 50% for 2026 and sequential improvement in the second half. Reaching that level will require cost mitigation and mix improvements to counter external pressures while strategic investments continue.

MAT Still Has Execution Risks to Clear

Dolls gross billings fell 7% in constant currency in the second quarter, primarily because of Barbie and Polly Pocket. Infant, Toddler and Preschool declined 13%, mainly on Fisher-Price weakness. Mattel does not expect Barbie to return to growth until 2027.

Execution risk also extends to films and digital games. Matchbox is scheduled for October 2026, while UNO Wild is in soft launch ahead of an early-2027 commercial release. Management expects strategic investments to become net positive to the bottom line in 2027 and beyond.

Mattel's Hold Signal Fits a Mixed Setup

For investors weighing whether to buy or wait, Mattel combines attractive valuation characteristics with improving diversification, but margins and category weakness keep the earnings setup uneven. The stock currently carries a Zacks Rank #3 (Hold), which is consistent with a wait-and-see approach rather than a clear buy signal. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mattel has a Value Score of A and VGM Score of B, supporting the valuation side of the case. Its Growth Score of C and Momentum Score of D are less favorable. Together, the readings argue for patience until margin recovery and earnings trends become more convincing.

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