Why Barbie Stock Could Be a Buy Before Earnings

Since touching a nine-year low in April, following a surprise CEO departure and the shuttering of Toys ‘R’ Us, toymaker Mattel (MAT) has added roughly 31%. What’s more, the stock recently flashed a historical bullish signal on the charts, just ahead of the Barbie maker’s expected earnings release next Wednesday, July 25.

MAT recently came within one standard deviation of its 160-day moving average, after a lengthy stretch above this trendline.  After similar pullbacks in the past, the security went on to average a one-month gain of 9.08%, and was higher 67% of the time, per data from Schaeffer’s Senior Quantitative Analyst Rocky White.

Mattel shares closed Wednesday in the $16 vicinity — right above their year-to-date breakeven level. A similar pop from current levels would put MAT around $17.50 in the next month. A break north of the $17.50-$18 region would be even more significant, as this area has acted as a speed bump for the shares in 2018.

In addition, it’s worth mentioning that Mattel stock reacted positively after the company’s other two earnings reports this year, after reacting negatively to earnings every time in 2017. Another well-received report next week could shake loose some short sellers. Short interest represents 21.5% of MAT’s total available float, or about a month of pent-up buying demand, at the stock’s average pace of trading.

Plus, an upside breakout could spark optimism among analysts. Currently, just three of 12 brokerage firms consider the toy stock worthy of a “buy” or better rating, leaving plenty of room for upgrades to lure more buyers to the table.