It’s the Summer of Barbie. How That Could Revitalize Mattel Stock.

Analysts expect the Warner Bros. (ticker: WBD) project to bring in upward of $90 million during its opening weekend. If the film’s success at the box office comes anywhere close to matching its marketing hype, analysts say it could kick-start a new era for Barbie-parent
Mattel
(ticker: MAT).

That’s because the toy maker behind nostalgic consumer brands like Barbie, Polly Pockets, and Hot Wheels is currently developing 14 other films that will aim to replicate Barbie’s cultural impact and anticipated financial upside. Mattel executives have made no secret of how important director Greta Gerwig’s Barbie movie is to launching their cinematic universe—calling the film a “milestone moment” for the company during a March investor meeting. 

Chief Executive Ynon Kreiz joined Mattel in 2018 with a background in TV. He brought a vision for how Mattel could capitalize on monetizing its brands in the media industry, says UBS analyst Arpiné Kocharyan.

“The Barbie movie is going to be the first litmus test of his strategy,” Kocharyan said. “He understood, from the beginning, that stakes are going to be high, especially with a brand like this where, if something were to go wrong, it could backfire so meaningfully.”

Kocharyan says execution is everything when creating a film centering on Barbie, a decades-old American symbol that has faced criticism in the past for promoting unrealistic body image and overconsumption.

Mattel has also been on the upswing recently, with toy sales soaring early in the pandemic as parents searched for ways to keep their children occupied. But at the start of this year, analysts were hesitant to forecast growth for the company’s flagship brand because of Barbie’s controversial history and the massive pandemic sales boom.

Then, a monthslong marketing blitz turned Barbie into a cultural juggernaut, and Mattel’s potential upside from the film ballooned. Its stock has gained 18% this year and has been steadily climbing this month—up 20%— ahead of opening weekend.

Mattel has also engaged in more than 100 Barbie movie licensing deals to capitalize on consumer excitement for the film, including with well-known brands like Gap (GPS),
Crocs
(CROX), Forever 21, and Burger King. Barbie-licensed products should notch a sky-high profit margin for Mattel, with some analysts pegging it as high as 95%. Kocharyan expects the company to bring in at least $130 million in royalties from Barbie consumer product deals, which could boost earnings per share.

Consumer product success from the film could cast a halo effect on Mattel. There is a sign of Barbie fever among some adults, who are showing support with flamenco pink moviegoing outfits and countless social media posts. The film’s ability to capture older audiences could carry Mattel products through the holiday season, says Morningstar analyst Jaime Katz.

“Barbie has been around since the ’60s, so everybody has grown up with it. It doesn’t matter what generation you are, whether you’re a boomer or millennial, there’s a lot of touch points on it,” Katz said. “And at the end of the day, the adults are the ones who are going into the store and purchasing the toy items.”

Mattel already expects the Barbie movie to boost sales for the rest of the year, says D.A. Davidson analyst Linda Bolton Weiser. She, however, doubts the company will beat its own second-half guidance, even with Barbie’s popularity, and doesn’t expect the film to boost Mattel’s earnings.

Perhaps more important, there is a long-term opportunity to solidify Barbie’s positive cultural reception and grow brand loyalty from the film’s success, Weiser said. Barbie products have not always been positioned correctly in the market, she notes—and Mattel hasn’t been immune to fumbles that left some consumers a negative perception of the doll. Now, with interest especially high, all eyes will follow how Mattel capitalizes on Barbie’s cultural resurgence, Weiser said.

Regardless of what’s next for the franchise, the Barbie film has already unlocked the dream house doors for millions of fans.

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