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3 Stock to Watch From 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. These firms, including Electronic Arts Inc. (EA - Free Report) , Mattel, Inc. (MAT - Free Report) and JAKKS Pacific, Inc. (JAKK - Free Report) , are likely to gain from the trends above. However, high costs are 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. The rising demand for STEM-focused 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. 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 #16, which places it in the top 6% 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. Since Mar 31, 2024, the industry’s earnings estimates for the current year have moved south by 0.3%.
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 5.6% over this period compared with the S&P 500’s rise of 22.3%. In the same time frame, the sector has gained 3.8%.
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 21.71X, higher than the S&P 500’s 20.53X 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 24.72X, as the chart shows.
3 Zacks Toys Stocks to Keep an Eye On
JAKKS Pacific: JAKKS Pacific is a multi-brand company that designs and markets a broad range of toys and consumer products. The company is benefiting from the FOB business model, strategic acquisitions, a solid international footprint, a focus on innovation and collaborations with popular brands and movie franchisees. The emphasis on the expansion of retail reach bodes well. The company realized the importance of online retailing and shifted its focus to boosting online sales. For 2024, JAKK announced a new agreement with SEGA in support of the Sonic Hedgehog 3 Paramount Pictures feature film, scheduled for release on Dec 20, 2024.
Shares of this Zacks Rank #1 (Strong Buy) company have increased 8.3% in the past year. In the past 30 days, the earnings estimate for 2024 has been revised upward by 14.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: JAKK
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 has been witnessing a rise in usage and engagement levels for games under the FIFA franchise, especially FIFA Online 4 and FIFA Mobile.
Shares of this Zacks Rank #2 (Buy) company have decreased 1.5% in the past year. Its earnings for the fiscal 2024 are anticipated to increase 29.5%. In the past 90 days, the earnings estimate for 2023 has been revised upward by 0.7%.
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 increased 4.6% in the past three years. The company’s earnings in 2024 are likely to witness an increase of 11.4%.
Price & Consensus: MAT
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3 Stock to Watch From 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. These firms, including Electronic Arts Inc. (EA - Free Report) , Mattel, Inc. (MAT - Free Report) and JAKKS Pacific, Inc. (JAKK - Free Report) , are likely to gain from the trends above. However, high costs are 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. The rising demand for STEM-focused 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. 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 #16, which places it in the top 6% 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. Since Mar 31, 2024, the industry’s earnings estimates for the current year have moved south by 0.3%.
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 5.6% over this period compared with the S&P 500’s rise of 22.3%. In the same time frame, the sector has gained 3.8%.
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 21.71X, higher than the S&P 500’s 20.53X 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 24.72X, as the chart shows.
3 Zacks Toys Stocks to Keep an Eye On
JAKKS Pacific: JAKKS Pacific is a multi-brand company that designs and markets a broad range of toys and consumer products. The company is benefiting from the FOB business model, strategic acquisitions, a solid international footprint, a focus on innovation and collaborations with popular brands and movie franchisees. The emphasis on the expansion of retail reach bodes well. The company realized the importance of online retailing and shifted its focus to boosting online sales. For 2024, JAKK announced a new agreement with SEGA in support of the Sonic Hedgehog 3 Paramount Pictures feature film, scheduled for release on Dec 20, 2024.
Shares of this Zacks Rank #1 (Strong Buy) company have increased 8.3% in the past year. In the past 30 days, the earnings estimate for 2024 has been revised upward by 14.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: JAKK
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 has been witnessing a rise in usage and engagement levels for games under the FIFA franchise, especially FIFA Online 4 and FIFA Mobile.
Shares of this Zacks Rank #2 (Buy) company have decreased 1.5% in the past year. Its earnings for the fiscal 2024 are anticipated to increase 29.5%. In the past 90 days, the earnings estimate for 2023 has been revised upward by 0.7%.
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 increased 4.6% in the past three years. The company’s earnings in 2024 are likely to witness an increase of 11.4%.
Price & Consensus: MAT