Shares of Mattel (MAT) are sliding after DA Davidson analyst Linda Bolton Weiser downgraded the stock to Underperform, a sell-equivalent rating, following a recent meeting with the company's management. The analyst left the meeting with an even more cautious outlook for the company's performance in the second half of 2017.

SELL MATTEL: In a research note to investors this morning, DA Davidson's Weiser downgraded Mattel to Underperform from Neutral and lowered her price target on the shares to $18 from $22. The analyst pointed out that she left a recent management meeting with a "heightened awareness" of a few issues and an even more cautious outlook for the company's performance in the second half of 2017. Weiser said she was "struck by how many times President Richard Dickson and CFO Kevin Farr reiterated their intent to start 2018 clean" during the meeting. She also highlighted that management gave color on the ongoing brick-and-mortar to e-commerce shift, which is one of the reasons Point of Sale growth and shipment growth have become more misaligned, with Mattel estimating the shift will reduce channel inventory by about half. While the company is sticking to its guidance for low-single digit sales growth in 2017, the analyst argued that she believes the objective to end the year "clean" overrides 2017 P&L performance.

CARS 3: DA Davidson's Weiser also told investors that she came away with the impression that Mattel's 2017 Cars 3 sales are likely to come in below the $300M guidance, but not significantly below. The company is working with Disney (DIS) for a dial-up of the marketing and promotional activity in the U.S., with higher spending on the latter's part, the analyst added.

WHAT'S NOTABLE: Earlier this week, her peer at UBS also said she remained cautious on Mattel's shares near-term, citing uncertainty around prioritization of reinvestment dollars. Analyst Arpine Kocharyan argued in a research note of her own that shares may be range bound through the fall until further clarity is reached on holiday season positioning. Further, she noted that inventories are lean and second quarter shipments were soft partially due to tighter inventory management as well as pruning of smaller licensed portfolio. Kocharyan reiterated a Buy rating on the stock, but lowered her price target on Mattel's shares to $23 from $26.

PRICE ACTION: In morning trading, shares of Mattel have dropped almost 3% to $19.06. Hasbro (HAS), Mattel's biggest publicly traded U.S. competitor, is up fractionally to about $105 per share.