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3 Toys & Games Industry Stocks to Watch in a Promising 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. These firms, including Electronic Arts Inc. (EA - Free Report) , Mattel, Inc. (MAT - Free Report) and Take-Two Interactive Software, Inc. (TTWO - Free Report) , are likely to gain from the trends above. However, high costs remain a concern for the industry.
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.
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. 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: The 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. Per the IMARC Group report, the global toys market, which reached $183 billion in 2023, is expected to reach $326 billion by 2032. This suggests a compound annual growth rate (CAGR) of 6.5% during 2024-2032.
High Costs Remain Concerns: Cost inflation hurt the industry due to rising raw materials prices. Supply chain disruption has been denting the industry’s performance. Higher employee-related expenses are also hurting the industry. The companies 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 may soon prove detrimental to the industry.
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 #46, which places it in the top 18% of 251 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.
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 11.6% over this period compared with the S&P 500’s rise of 20.3%. In the same time frame, the sector has gained 2.2%.
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 23.01X, higher than the S&P 500’s 20.31X but lower than the sector’s 16.64X.
Over the last five years, the industry has traded as high as 33.79X and as low as 17.24X, with the median being 25.58X, 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. Live services are benefiting from portfolio strength on the back of franchises, including Apex Legends, Madden NFL, FIFA and The Sims.
Shares of this Zacks Rank #2 (Buy) company have increased 6.8% in the past year. Its earnings for the fiscal 2024 are anticipated to increase 28.6%. In the past 60 days, the earnings estimate for 2023 has been revised upward by 3.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: EA
Mattel: The company is benefiting from product portfolio expansion strategies across its key brands, the Optimizing for Growth program and solid demand for 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 4% in the past three months. The company’s earnings in 2024 are likely to witness an increase of 9.9%.
Price & Consensus: MAT
Take-Two Interactive: Based in New York City, Take Two Interactive Software is a leading developer and publisher of video games. Take Two’s top line has been gaining from strong digital revenues, driven by the solid demand for well-known game franchises like GTA, Red Dead Redemption and NBA. The company expects this trend to continue. Fiscal 2024 net sales are expected to rise 3.2% year over year.
Shares of this Zacks Rank #3 company have surged 48.3% in the past year. In 2024, the company’s sales are likely to witness growth of 4.2% year over year.
Price & Consensus: TTWO
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3 Toys & Games Industry Stocks to Watch in a Promising 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. These firms, including Electronic Arts Inc. (EA - Free Report) , Mattel, Inc. (MAT - Free Report) and Take-Two Interactive Software, Inc. (TTWO - Free Report) , are likely to gain from the trends above. However, high costs remain a concern for the industry.
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.
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. 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: The 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. Per the IMARC Group report, the global toys market, which reached $183 billion in 2023, is expected to reach $326 billion by 2032. This suggests a compound annual growth rate (CAGR) of 6.5% during 2024-2032.
High Costs Remain Concerns: Cost inflation hurt the industry due to rising raw materials prices. Supply chain disruption has been denting the industry’s performance. Higher employee-related expenses are also hurting the industry. The companies 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 may soon prove detrimental to the industry.
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 #46, which places it in the top 18% of 251 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.
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 11.6% over this period compared with the S&P 500’s rise of 20.3%. In the same time frame, the sector has gained 2.2%.
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 23.01X, higher than the S&P 500’s 20.31X but lower than the sector’s 16.64X.
Over the last five years, the industry has traded as high as 33.79X and as low as 17.24X, with the median being 25.58X, 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. Live services are benefiting from portfolio strength on the back of franchises, including Apex Legends, Madden NFL, FIFA and The Sims.
Shares of this Zacks Rank #2 (Buy) company have increased 6.8% in the past year. Its earnings for the fiscal 2024 are anticipated to increase 28.6%. In the past 60 days, the earnings estimate for 2023 has been revised upward by 3.4%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: EA
Mattel: The company is benefiting from product portfolio expansion strategies across its key brands, the Optimizing for Growth program and solid demand for 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 4% in the past three months. The company’s earnings in 2024 are likely to witness an increase of 9.9%.
Price & Consensus: MAT
Take-Two Interactive: Based in New York City, Take Two Interactive Software is a leading developer and publisher of video games. Take Two’s top line has been gaining from strong digital revenues, driven by the solid demand for well-known game franchises like GTA, Red Dead Redemption and NBA. The company expects this trend to continue. Fiscal 2024 net sales are expected to rise 3.2% year over year.
Shares of this Zacks Rank #3 company have surged 48.3% in the past year. In 2024, the company’s sales are likely to witness growth of 4.2% year over year.
Price & Consensus: TTWO