Mattel's 30% Crash Confirms DeepValue Bear Case on Tariff and Margin Pressure

What happened

Mattel's stock plunged 30% premarket on February 11, 2026, after issuing disappointing 2026 forecasts, signaling investor alarm over its growth prospects. In stark contrast, Hasbro's shares rose 9% driven by its digital gaming business, highlighting a strategic divergence where Mattel's reliance on physical toys leaves it more exposed to retail and tariff headwinds. This sell-off validates DeepValue's earlier warnings about persistent North America weakness, with Q3 2025 sales down 12% amid retailer ordering shifts and promotional demands. The crash aligns with the report's bear case scenario, implying a $17 value if gross margin structurally resets below 49% despite OPG cost savings. Overall, the market is pricing in higher downside risk as Mattel's portfolio rotation and entertainment bets struggle to offset Barbie normalization and tariff drag.

Implication

Investors must accept that Mattel's 2026 guidance likely signals gross margin pressure below the critical 49% threshold, risking a downgrade to 'POTENTIAL SELL' per DeepValue's framework. The stock's plunge toward the bear case $17 value leaves limited upside without robust Q4 2025 holiday results or tariff relief, making near-term volatility probable. Hasbro's outperformance underscores the premium on digital and high-margin segments, areas where Mattel's partner-financed entertainment projects are still unproven. For existing holders, this requires tight monitoring of sales adjustments and OPG savings realization in upcoming filings. New capital should wait for an entry closer to $18 or clearer signs that North America revenue and gross margins are stabilizing beyond temporary fixes.

Thesis delta

The news confirms DeepValue's thesis that Mattel's execution and policy risks are materializing, with the stock drop aligning with the bear case driven by tariff and promotional overwhelm. This shifts the rating closer to a potential downgrade to 'POTENTIAL SELL' if forthcoming 2026 guidance explicitly implies gross margin below 49% and North America fails to stabilize. However, the core 'WAIT' recommendation holds, emphasizing patience for a better risk-reward entry or operational evidence before increasing exposure.