Shares in toymaker Mattel Inc. shot up more than 7 percent Wednesday after investment firm Needham & Co. upgraded the stock to “strong buy” from “hold.”

Analyst Sean McGowan said the stock is ready for a rebound after declining nearly 30 percent over the past year, which he said “more than adequately discounts a host of headwinds” that include slowing consumer spending, rising costs and last year’s toy recalls.

However, McGowan did reduce his 2007 profit estimate to $1.42 a share from $1.47 and also lowered this year’s profit expectation to $1.60 from $1.75, reflecting slower sales growth and higher costs.

Shares in the El Segundo-based company gained $1.24 to $17.89 in early trading Wednesday on the New York Stock Exchange. The surge represented the largest gain since the summer of 2006.