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Toy Industry Set to be on a Roll in 2021: 3 Stocks to Watch

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The outbreak of the COVID-19 pandemic in 2020 saw schools shifting to online classes. Moreover, parents were hesitant to take their children to playgrounds as the risk of exposure to the virus loomed large. Hence, with both schools and playgrounds being inaccessible to children, they needed another form of engagement and this is where toys took center stage. After all, toys have always been a favorite among children.

Notably, the trend is set to continue in the near future as well. Per a report by ReportLinker, the global doll, toy and game market is expected to witness a CAGR of 4.4% in 2021, reaching $102.26 billion from $97.99 billion in 2020, as mentioned in a GlobeNewswire article. Moreover, the article mentioned that the global doll, toy and market is expected to reach $135.66 billion in 2025, at a CAGR of 7%.

United States Sees Robust Toy Sales in 2020

The article further mentioned that in 2020, North America was the second-largest region in terms of market share and accounted for 27% of the global doll, toy and game market. Reflective of this, the NPD Group reported that U.S. retail sales of toys witnessed an increase of 16% in 2020, to reach $25.1 billion.

The report mentioned that with the closure of schools, disposable income shifted from other forms of entertainment to toys with the stimulus checks also providing support. In fact, the report stated that May saw the strongest retail toy sales growth of 38%, thanks to the distribution of the stimulus checks from April. Meanwhile, the holiday season also contributed to the growth of toy sales with October witnessing an increase of 33%.

E-commerce Aids Toy Sales

E-commerce has become a go-to option for consumers as it offers the convenience of choosing from a plethora of products without having to physically travel the various sections of a store and have them delivered at their doorstep. Markedly, the COVID-19 pandemic only helped in boosting that reliance on online shopping as brick-and-mortar stores were shut. Even when stores reopened, consumers remained hesitant to visit them.

Notably, parents also shopped for toys online. In fact, the NPD report mentioned that in the United States, the first three quarters of 2020 saw online toy sales rising 75% on a year-over-year basis. Interestingly, the trend is set to continue in 2021 even as the vaccination drive continues to pick up in the United States. Notably, IBISWorld predicted that the market size of U.S. children’s toy sales online is set to increase 4.6% this year.

3 Stocks to Keep a Close Eye On

Toys have always been a favorite recreation among children and despite the challenges posed by the pandemic, sales grew, especially in the United States and are expected to grow in the future as well. Hence, this seems to be a good time to look at companies with strong fundamentals, that can make the most of this potential. Notably, we have selected three such stocks that carry a Zacks Rank # 1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

Mattel, Inc. (MAT - Free Report) , a children's entertainment company, designs and produces toys and consumer products worldwide. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 13.5% over the past 60 days. The company’s expected earnings growth rate for the current year is 55.6%.

JAKKS Pacific, Inc. (JAKK - Free Report) develops, produces and markets toys, consumables, and electronics and related products worldwide. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings improved 3.1% over the past 60 days. The company’s expected earnings growth rate for the current year is 63.4%.

Hasbro, Inc. (HAS - Free Report) , together with its subsidiaries, operates as a play and entertainment company and the company's U.S. and Canada segment markets and sells action figures, arts and crafts, and creative play products, among others. The company currently has a Zacks Rank #3. The Zacks Consensus Estimate for its current-year earnings increased 0.2% over the past 60 days. The company’s expected earnings growth rate for the current year is 14.2%.

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