The Goldman Research Note Pushing Mattel Stock Higher

In a report published Friday, analysts at Goldman Sachs upgraded

to Buy. The price target was raised from $26 to $37. The new leadership at the company is expected to be a catalyst to change. Shares were up almost 5 percent in Friday's premarket. "We believe new management is making the right strategic changes by reprioritizing an innovative culture and emphasizing the need for partnerships with Hollywood and Silicon Valley," the analysts stated. Despite the loss of rights for manufacturing the Disney dolls from 2016, the analysts expect Mattel to recover from the EPS trough being witnessed in 2015, driven by "a renewed sense of urgency, expense discipline and improved execution." However, the company could take some time to return to peak EPS levels. The analysts estimate the company would post its EPS at $1.97 for 2017, representing growth of 37 percent from the 2015 levels. "Our underlying thesis is that the "toy industry" is evolving from a legacy vendor model into part of a larger ecosystem integrated with media and technology," the analysts said. While IP owners using toys to capitalize on consumer product opportunities, toy companies are "monetizing their IP into new license streams." The analysts believe this situation creates a favorable environment for innovation. Although Mattel had been lagging behind its peers in adapting to these circumstances, it is now catching up. "We believe new leadership is a catalyst for change at MAT and look for POS progress in 2015 against clean inventories and more effective execution. We expect EPS to return to growth beginning in 4Q15," Goldman Sachs added.