In case you’ve been living under a pink rock for the past few months, Barbie is finally coming to movie theaters in a full-length live-action feature starring Margot Robbie as the lead Barbie (there are others, so get ready for culture wars) and Ryan Gosling as the lead Ken. And with Greta Gerwig as the director (Lady Bird, Little Women), the film is likely to have a little more art-house style and Oscars credibility than your standard studio movie based on a doll. There’s been a lot of social media excitement about the Barbie movie, which interestingly has led to a lot of viral excitement about “Barbie stock” —Mattel (symbol: MAT), maker of Barbie dolls. And as much as we love the TikTok videos they made us wonder, once a stock has gone viral, is it too late to get in?
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Buying a Stock That’s Gone Viral
The conventional wisdom on Wall Street is that when the general public knows about an investment, it’s too late. The logic is that the public only learns of something after movement from insiders. Social media has changed this a bit, because information can now be spread instantaneously. While this can lead to solid “insider” information, it can also lead to unverified (and inaccurate) info spiraling out of control.
With that in mind, if you want to make a trade based on something you spotted on TikTok, go for it — just make sure you use money you can afford to lose, since this would be considered a high risk play (or the type of play made by momentum traders and day traders, who can get in or out of a position on a moment’s notice). Without doing your due diligence, a viral stock play is like betting on a horse based on the color of the jockey’s silks — it may work sometimes, but it’s not a strategy you can count on.
Still, there can sometimes be money to be made investing in a viral stock — if it’s a solid company and it still has more upside to run, it’s not too late. But if the viral video you spotted wasn’t based on solid fundamentals, or the stock actually went viral a month ago and you were late to the tweet, it’s too late.
An advisor we spoke with says one advantage to buying after a viral moment is that “people will continue to buy it for a host of reasons — and sell it and buy it. The volatility will be more intense, so buyers/holders would have to know they are speculating and be prepared for greater possibility of price swings.”
So… Does This Mean We Can Use Barbie Excitement To Our Advantage?
Yes and no. Take Paris Hilton who was THE viral personality of 2008. Her movie, “The Hottie and the Nottie,” tanked spectacularly, despite her fame. History tells us that there will always be unexpected flops just like there will always be sleeper hits. Movies, toys, and even stocks, go viral for all kinds of reasons, but always trying to “get in early” is the equivalent of timing the market — it’s impossible to consistently make money.
As Barbie’s release has gotten closer, however, Mattel has been on a run. The stock is up 18% in the past month, after peaking and then dropping since February. Mattel’s market cap is nearly $7 billion — way more than Barbie could ever gross at the box office — and the movie’s distributor, Warner Bros., will make the bulk of the Barbie money if the movie is a hit.
For Mattel, Licensing And Doll Sales Are Key
So, with Warner Brothers in line to see the biggest box office benefit, Mattel will look to profit on Barbie licensing. The company has now made deals with more than 100 brands, so fans can float in a Barbie golf cart pool float (yes, we’re serious, and tbh we want one) or stay at an AirBnB that’s a lifesize version of Barbie’s Malibu DreamHouse (Ken not included). Mattel hopes all this BarbieMania enhances recognition of the Barbie brand and raises the doll’s coolness factor. If the movie flops but Mattel stills sells millions of Barbie collectible dolls for $25-$50 or Barbie’s pink Corvette convertible for $75, that could mean big profits for the toymaker. But ideally Mattel wants the movie to be enough of a hit that studios are willing to pay more to make other movies based on Mattel products. A Hot Wheels movie is already in pre-production… Maybe a Thomas the Tank Engine will be next, or perhaps a Magic 8 Ball movie in which the Magic 8 Ball scares teenagers with soon-to-be-true prophecies? (They’ve just gotta teach it to say something other than “Signs point to yes” if they wanna get butts in the seats.)
Can MAT Support The Hype?
To learn a bit more about Mattel and whether its fundamentals are Tik-Tok worthy, we spoke with Jaime Katz, a Morningstar analyst who follows the company.
Morningstar believes Mattel’s real value is $25 per share, so even with the recent rise to close to $22 (be that rise due to viral support or other factors), some experts on Wall Street — not Tik-Tok — see room for another $3 gain in the stock price.
“We think the movie is a good channel to elevate the Barbie brand and generate buzz around Barbie creating demand for products,” Katz says. “Mattel has partnered with other companies which is likely to create a halo effect around the line, so we don’t think the consumer interest in the brand would be as fleeting as with a film like ‘Top Gun.’”
She also thinks that the film being aimed largely at adults is a wise move. “Parents (rather than children) are the core purchasers of toys,” Katz says. “Reminding parents of positive memories from their youth could make them more likely to encourage their children to play with similar products. It could also help doll sales for the holiday season, which would benefit Mattel shares if the product was able to sell without significant promotional spend to facilitate transactions.”
As to whether Mattel will go entertainment stratosphere big — i.e. the Marvel route, creating its own studio to oversee its own movies — Katz doesn’t think that’s likely. “Internal production would depend heavily on the investment required for each individual film,” she says, “and the expected box office success for Mattel to go forward with its own production is something we don’t expect Mattel to pursue in a significant way over the near term.”
A Barbie-inspired takeover bid for Mattel also seems unlikely. “Hasbro has long held in-demand IP — think Transformers — and a studio has not pursued Hasbro,” Katz says. “Given that toys are not the core competency of film production companies, we think this might surface through a partnership rather than an acquisition.”
READ MORE FROM HERMONEY:
- 10 Investing Questions Answered in Plain English
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- 5 Ways to Buy Stocks for Kids
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