Mattel has a bright future ahead as it rides the residuals of the Barbie movie’s success, according to Citi. The bank initiated coverage of the toy manufacturer on Friday with a buy rating. Its $26 price target signifies a 25% potential upside from the stock’s Thursday closing price of $20.73. Shares of Mattel are up more than 16% since the start of the year. The stock climbed nearly 22% from the end of June into July, aided by hype around the Barbie movie released in July. MAT YTD mountain Mattel YTD chart Despite this rally, analyst James Hardiman thinks there are more gains ahead stemming from Mattel’s balance sheet deleveraging. A commitment to paying down debt has resulted in a “significant improvement” in the firm’s leverage ratio, he wrote. Improving margins should also help to propel the stock upward. “The company’s focus on increasing profitability has resulted in over $1.25B in cost savings since 2018 with an additional ~$50M expected in 2H23. While MAT has not outlined incremental cost savings beyond 2023, increasing profitability remains one of the primary cited pillars of its long-term strategy, driven by ongoing optimization of its operations,” the analyst said. Of course, this increasing profitability has directly resulted from Mattel’s strong industry-leading position – and the unprecedented success of the Barbie movie. This should directly result in a surge in Barbie sales beyond just the upcoming season, as well as at least one sequel for the movie. “The crowning jewel of MAT’s new content strategy has been the resounding success of 2023’s live-action Barbie film, which has grossed $1.4B as of mid-October, placing it in the top 15 highest grossing films of all time,” he wrote. “Building on the Barbie phenomenon, Mattel has a number of films and TV shows in development, with the aim to grow the value of its IP portfolio and compete with growing alternatives for children’s attention.” — CNBC’s Michael Bloom contributed to this report.