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2 Stocks Gaining Traction in the Promising Toys & Games Industry
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The Zacks Toys - Games - Hobbies industry benefits from the robust demand for smart toys, STEM (science, technology, engineering and math) toys, sports toys, and fashion dolls and accessories. Industry participants have been undertaking efforts on the digital front and focusing on better execution of marketing and promotional initiatives to drive growth. Stocks like Mattel, Inc. (MAT - Free Report) and JAKKS Pacific, Inc. (JAKK - Free Report) are likely to gain from these trends.
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, as well as handheld and home console hardware systems and related software. Some companies develop and operate retail and online military simulation games, and offer multi-player and single-player games.
3 Trends Shaping the Future of Zacks Toys - Games - Hobbies Industry
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 STEM toys. Parents are focusing more on educational toys to teach their children. The rising demand for STEM-focused toys reflects a growing recognition of their significance in preparing students for their 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.
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.
High Costs Remain Concerning: Cost inflation hurt the industry due to rising raw material 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 prove detrimental.
Zacks Industry Rank Indicates Bright 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 bright near-term prospects.
The Zacks Toys – Games – Hobbies industry currently carries a Zacks Industry Rank #3, which places it in the top 1% 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 May 31, 2024, the industry’s earnings estimates for the current year have moved 2.8% south.
Before we present a few stocks that investors can take a look at, let us 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 grown 17.9% over this period compared with the S&P 500’s rise of 26.9%. In the same time frame, the sector has risen 13.5%.
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 22.85X, higher than the S&P 500’s 22.37X and the sector’s 16.63X.
Over the last five years, the industry traded as high as 36.28X and as low as 15.31X, with the median being 23.44X, as the chart shows.
Two Zacks Toys Stocks to Keep an Eye On
JAKKS Pacific: Based in Malibu, CA, this is a multi-brand company that has been designing and marketing a broad range of toys and consumer products. JAKKS Pacific is benefiting from product expansions and the FOB selling model. Its focus on diversifying its product line, accretive collaborations and retail expansion initiatives are encouraging. Looking ahead, JAKKS Pacific has a promising lineup of new products tied to blockbuster franchises such as Sonic 3, Moana 2 and Dog Man. These launches are expected to generate significant consumer interest and revenues, particularly during the holiday season and in 2025.
Shares of this Zacks Rank #1 (Strong Buy) company have surged 64.2% in the past six months. In the past 30 days, JAKK’s earnings estimates for 2025 have been revised 7.1% upward. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: JAKK
Mattel: The company is likely to benefit from the Optimizing for Profitable Growth program and strong demand for Hot Wheels. These factors, and initiatives to capture the full value of its IPs and transform itself into a high-performing toy company bode well. Going forward, the company anticipates the toy segment to grow on the back of product innovations, increased retail support, enhanced marketing, promotions and fresh content.
Shares of this Zacks Rank #1 company have gained 14% in the past six months. The company’s 2025 earnings are likely to witness a year-over-year increase of 9.5%.
Price & Consensus: MAT
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2 Stocks Gaining Traction in the Promising Toys & Games Industry
The Zacks Toys - Games - Hobbies industry benefits from the robust demand for smart toys, STEM (science, technology, engineering and math) toys, sports toys, and fashion dolls and accessories. Industry participants have been undertaking efforts on the digital front and focusing on better execution of marketing and promotional initiatives to drive growth. Stocks like Mattel, Inc. (MAT - Free Report) and JAKKS Pacific, Inc. (JAKK - Free Report) are likely to gain from these trends.
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, as well as handheld and home console hardware systems and related software. Some companies develop and operate retail and online military simulation games, and offer multi-player and single-player games.
3 Trends Shaping the Future of Zacks Toys - Games - Hobbies Industry
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 STEM toys. Parents are focusing more on educational toys to teach their children. The rising demand for STEM-focused toys reflects a growing recognition of their significance in preparing students for their 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.
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.
High Costs Remain Concerning: Cost inflation hurt the industry due to rising raw material 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 prove detrimental.
Zacks Industry Rank Indicates Bright 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 bright near-term prospects.
The Zacks Toys – Games – Hobbies industry currently carries a Zacks Industry Rank #3, which places it in the top 1% 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 May 31, 2024, the industry’s earnings estimates for the current year have moved 2.8% south.
Before we present a few stocks that investors can take a look at, let us 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 grown 17.9% over this period compared with the S&P 500’s rise of 26.9%. In the same time frame, the sector has risen 13.5%.
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 22.85X, higher than the S&P 500’s 22.37X and the sector’s 16.63X.
Over the last five years, the industry traded as high as 36.28X and as low as 15.31X, with the median being 23.44X, as the chart shows.
Two Zacks Toys Stocks to Keep an Eye On
JAKKS Pacific: Based in Malibu, CA, this is a multi-brand company that has been designing and marketing a broad range of toys and consumer products. JAKKS Pacific is benefiting from product expansions and the FOB selling model. Its focus on diversifying its product line, accretive collaborations and retail expansion initiatives are encouraging. Looking ahead, JAKKS Pacific has a promising lineup of new products tied to blockbuster franchises such as Sonic 3, Moana 2 and Dog Man. These launches are expected to generate significant consumer interest and revenues, particularly during the holiday season and in 2025.
Shares of this Zacks Rank #1 (Strong Buy) company have surged 64.2% in the past six months. In the past 30 days, JAKK’s earnings estimates for 2025 have been revised 7.1% upward. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: JAKK
Mattel: The company is likely to benefit from the Optimizing for Profitable Growth program and strong demand for Hot Wheels. These factors, and initiatives to capture the full value of its IPs and transform itself into a high-performing toy company bode well. Going forward, the company anticipates the toy segment to grow on the back of product innovations, increased retail support, enhanced marketing, promotions and fresh content.
Shares of this Zacks Rank #1 company have gained 14% in the past six months. The company’s 2025 earnings are likely to witness a year-over-year increase of 9.5%.
Price & Consensus: MAT
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