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3 Toys & Games Stocks to Watch Despite Industry Challenges
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The Zacks Toys - Games – Hobbies industry is hurt by a decline in toy sales and high costs. However, benefits from the robust demand for smart toys, STEM (Science, Technology, Engineering and Math) toys, sports toys and fashion dolls and accessories bode well. Industry participants have been undertaking efforts on the digital front and focusing on better execution of marketing and promotional initiatives to drive growth. These firms, including Electronic Arts Inc. (EA - Free Report) , Hasbro, Inc. (HAS - Free Report) and Mattel, Inc. (MAT - Free Report) , are likely to gain from the trends above.
Industry Description
The Zacks Toys - Games – Hobbies industry comprises companies that design, manufacture and sell various games and toys. While traditional toymakers primarily focus on marketing and selling action figures, accessories, dolls, youth electronics and arts and crafts, other industry players develop and market content and services on video game consoles, personal computers and mobile. Some industry participants offer video game platforms, playing cards, Karuta and other products, along with handheld and home console hardware systems and related software. A few companies also develop and operate retail and online military simulation games and provide multiplayer and single-player games.
4 Trends Shaping the Future of Zacks Toys - Games - Hobbies Industry
Decline in Toys Sales: The toy industry is currently facing a sales decline due to a mix of economic pressures and changing consumer behaviors. High prices and budget constraints make it difficult for many consumers to prioritize toy purchases. Factors such as increasing household debt, a slowdown in GDP growth, and varying consumer confidence levels contribute to this downward trend.
High Costs Remain Concerns: Cost inflation hurt the industry due to rising raw materials prices. Higher employee-related expenses are also hurting the industry. The firms have been resorting to product launches and shifting toward more technology-driven toys to boost sales, which might drive profits in the long haul. However, costs related to the initiatives might soon prove detrimental.
STEM Toys Gaining Popularity: Amid declining sales of traditional toys, the robust demand for STEM toys has come as a breather. The Asia Pacific region emerged as a significant growth driver for STEM toys. Countries like India, Malaysia, Singapore and Thailand are witnessing rising demand for the same. Parents are focusing more on educational toys to teach their children. The rising demand for these toys reflects a growing recognition of their significance in preparing students for future careers. Factors such as heightened interest in coding and robotics toys have significantly shaped the market landscape. Industry players are capitalizing on new distribution methods, developing digital-play components, exploring ventures with other industries and focusing on international expansion to drive growth. The industry has enormous growth potential in China and Brazil, which have massive populations of kids aged zero to 14 years.
Focus on Emerging Markets: Industry participants are focusing on expanding their presence in emerging markets in Eastern Europe, Asia and Latin and South America. Emerging markets offer greater opportunities for revenue growth than developed markets.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Toys – Games – Hobbies industry is grouped within the broader Zacks Consumer Discretionary Sector.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dismal near-term prospects.
The Zacks Toys – Games – Hobbies industry currently carries a Zacks Industry Rank #239, which places it in the bottom 4% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Since Apr 30, 2024, the industry’s earnings estimates for the current year have moved south by 14.8%.
Before we present a few stocks that investors can take a look at, let’s analyze the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the S&P 500
The Zacks Toys – Games – Hobbies industry has underperformed the S&P 500 Index. The industry has increased 1.3% over this period compared with the S&P 500’s rise of 27.7%. In the same time frame, the sector has gained 1.8%.
One-Year Price Performance
Industry's Current Valuation
Comparing the industry with the S&P 500 Index on the basis of forward 12-month price-to-earnings, which is a commonly used multiple for valuing the industry, we see that the industry is trading at 24.21X, higher than the S&P 500’s 21.91X and the sector’s 16.63X.
Over the last five years, the industry traded as high as 33.79X and as low as 17.24X, with the median being 24.37X, as the chart shows.
3 Zacks Toys Stocks to Keep an Eye On
Electronic Arts: Headquartered in Redwood City, CA, the company’s live services are benefiting from strength in new releases, continued live services growth, healthy engagement and player acquisition. EA’s popularity is primarily driven by its well-known franchises, which will continue to fuel the top line. EA SPORTS titles, along with Madden NFL, The Sims and Apex Legends, are some of its biggest franchises. In the fiscal 2024, the company launched seven new releases and provided more than 450 content updates across 51 titles. The strong games portfolio helped it to reach a user base of roughly 700 million.
Shares of this Zacks Rank #3 (Hold) company have increased 7% in the past year. Its earnings for the fiscal 2025 are anticipated to increase 8.6%. In the past 30 days, the earnings estimate for fiscal 2025 has been revised upward by 0.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: EA
Hasbro: Based in Pawtucket, RI, Hasbro is engaged in the design, manufacture and marketing of games and toys. The company is benefiting from new product and content launches under the Dungeons & Dragons universe. Also, focus on a new asset-light entertainment model, strategic partnerships with Playmates, LEGO, Converse and Black Milk Apparel and a strong product lineup bodes well.
Shares of this Zacks Rank #3 company have inched up 0.1% in the past three months. In the past 30 days, the earnings estimate for 2024 has been revised upward by 1.6%.
Price & Consensus: HAS
Mattel: The company is benefiting from product portfolio expansion strategies across its key brands, the Optimizing for Growth program and improving sales trends at Hot Wheels. Also, initiatives to capture the full value of its IPs and transform itself into a high-performing toy company bode well.
Shares of this Zacks Rank #3 company have declined 13.2% in the past three months. The company’s earnings in 2024 are likely to witness an increase of 13.8%.
Price & Consensus: MAT
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3 Toys & Games Stocks to Watch Despite Industry Challenges
The Zacks Toys - Games – Hobbies industry is hurt by a decline in toy sales and high costs. However, benefits from the robust demand for smart toys, STEM (Science, Technology, Engineering and Math) toys, sports toys and fashion dolls and accessories bode well. Industry participants have been undertaking efforts on the digital front and focusing on better execution of marketing and promotional initiatives to drive growth. These firms, including Electronic Arts Inc. (EA - Free Report) , Hasbro, Inc. (HAS - Free Report) and Mattel, Inc. (MAT - Free Report) , are likely to gain from the trends above.
Industry Description
The Zacks Toys - Games – Hobbies industry comprises companies that design, manufacture and sell various games and toys. While traditional toymakers primarily focus on marketing and selling action figures, accessories, dolls, youth electronics and arts and crafts, other industry players develop and market content and services on video game consoles, personal computers and mobile. Some industry participants offer video game platforms, playing cards, Karuta and other products, along with handheld and home console hardware systems and related software. A few companies also develop and operate retail and online military simulation games and provide multiplayer and single-player games.
4 Trends Shaping the Future of Zacks Toys - Games - Hobbies Industry
Decline in Toys Sales: The toy industry is currently facing a sales decline due to a mix of economic pressures and changing consumer behaviors. High prices and budget constraints make it difficult for many consumers to prioritize toy purchases. Factors such as increasing household debt, a slowdown in GDP growth, and varying consumer confidence levels contribute to this downward trend.
High Costs Remain Concerns: Cost inflation hurt the industry due to rising raw materials prices. Higher employee-related expenses are also hurting the industry. The firms have been resorting to product launches and shifting toward more technology-driven toys to boost sales, which might drive profits in the long haul. However, costs related to the initiatives might soon prove detrimental.
STEM Toys Gaining Popularity: Amid declining sales of traditional toys, the robust demand for STEM toys has come as a breather. The Asia Pacific region emerged as a significant growth driver for STEM toys. Countries like India, Malaysia, Singapore and Thailand are witnessing rising demand for the same. Parents are focusing more on educational toys to teach their children. The rising demand for these toys reflects a growing recognition of their significance in preparing students for future careers. Factors such as heightened interest in coding and robotics toys have significantly shaped the market landscape. Industry players are capitalizing on new distribution methods, developing digital-play components, exploring ventures with other industries and focusing on international expansion to drive growth. The industry has enormous growth potential in China and Brazil, which have massive populations of kids aged zero to 14 years.
Focus on Emerging Markets: Industry participants are focusing on expanding their presence in emerging markets in Eastern Europe, Asia and Latin and South America. Emerging markets offer greater opportunities for revenue growth than developed markets.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Toys – Games – Hobbies industry is grouped within the broader Zacks Consumer Discretionary Sector.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dismal near-term prospects.
The Zacks Toys – Games – Hobbies industry currently carries a Zacks Industry Rank #239, which places it in the bottom 4% of 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Since Apr 30, 2024, the industry’s earnings estimates for the current year have moved south by 14.8%.
Before we present a few stocks that investors can take a look at, let’s analyze the industry’s recent stock-market performance and valuation picture.
Industry Underperforms the S&P 500
The Zacks Toys – Games – Hobbies industry has underperformed the S&P 500 Index. The industry has increased 1.3% over this period compared with the S&P 500’s rise of 27.7%. In the same time frame, the sector has gained 1.8%.
One-Year Price Performance
Industry's Current Valuation
Comparing the industry with the S&P 500 Index on the basis of forward 12-month price-to-earnings, which is a commonly used multiple for valuing the industry, we see that the industry is trading at 24.21X, higher than the S&P 500’s 21.91X and the sector’s 16.63X.
Over the last five years, the industry traded as high as 33.79X and as low as 17.24X, with the median being 24.37X, as the chart shows.
3 Zacks Toys Stocks to Keep an Eye On
Electronic Arts: Headquartered in Redwood City, CA, the company’s live services are benefiting from strength in new releases, continued live services growth, healthy engagement and player acquisition. EA’s popularity is primarily driven by its well-known franchises, which will continue to fuel the top line. EA SPORTS titles, along with Madden NFL, The Sims and Apex Legends, are some of its biggest franchises. In the fiscal 2024, the company launched seven new releases and provided more than 450 content updates across 51 titles. The strong games portfolio helped it to reach a user base of roughly 700 million.
Shares of this Zacks Rank #3 (Hold) company have increased 7% in the past year. Its earnings for the fiscal 2025 are anticipated to increase 8.6%. In the past 30 days, the earnings estimate for fiscal 2025 has been revised upward by 0.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: EA
Hasbro: Based in Pawtucket, RI, Hasbro is engaged in the design, manufacture and marketing of games and toys. The company is benefiting from new product and content launches under the Dungeons & Dragons universe. Also, focus on a new asset-light entertainment model, strategic partnerships with Playmates, LEGO, Converse and Black Milk Apparel and a strong product lineup bodes well.
Shares of this Zacks Rank #3 company have inched up 0.1% in the past three months. In the past 30 days, the earnings estimate for 2024 has been revised upward by 1.6%.
Price & Consensus: HAS
Mattel: The company is benefiting from product portfolio expansion strategies across its key brands, the Optimizing for Growth program and improving sales trends at Hot Wheels. Also, initiatives to capture the full value of its IPs and transform itself into a high-performing toy company bode well.
Shares of this Zacks Rank #3 company have declined 13.2% in the past three months. The company’s earnings in 2024 are likely to witness an increase of 13.8%.
Price & Consensus: MAT