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3 Stocks to Watch as Demand for Toys Remains Robust

Demand for toys continues to remain robust around the world and is expected to grow going forward, making it wise to look at names like Mattel (MAT),...

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This story originally appeared on Zacks

When the COVID-19 pandemic gripped the world last year, children had to resort to online schooling. Outdoor activities were hindered by social distancing norms and parents resorted to purchasing toys and games to keep kids engaged.

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Playing games also emerged as a convenient way for parents to spend time with their children. These factors helped global toy sales in registering gains in 2020 despite the challenges posed by lockdowns and supply-related concerns.

Per the NPD Group, global toy sales increased 2.6% in 2020 and reached $95 billion, as mentioned in a Toy Association article. But the demand for toys is robust even in 2021 as in-person schooling remains uneven across the world and the Delta variant of coronavirus has raised concerns.

In the first half of 2021, global toy sales witnessed solid growth. The NPD Group stated in a separate report that across 12 global markets, toy sales rose 15% from the first half of 2020. It’s also interesting to note that this marked an increase of 28% over the first half of 2019.

E-commerce has been a driving force behind robust toy sales during the pandemic. Parents deemed it fit to order toys online from the comforts of their homes, rather than visiting stores in person even after they gradually opened up following the lifting of restrictions. The trend seems ready to continue this year as well, particularly in countries like the United States. Per a report by IBISWorld, the market size of the online children’s toy sales industry in the United States is expected to rise 4.6% in 2021.

Reflective of the continued demand that toys have been witnessing, it is no surprise that the global toys and games market is estimated to grow further. Per a report by Mordor Intelligence, the toys and games market is expected to witness a CAGR of 9.91% from 2021 to 2026.

3 Stocks to Watch Out For

Toys continued their robust sales growth around the world during the first half of 2021 and look set to grow in the future as well. This seems then an opportune moment to watch out for the companies that stand to benefit from this continued upswing. 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, a children's entertainment company, designs and produces toys and consumer products worldwide. In the second quarter of 2021, the company witnessed solid gross sales growth across popular brands like Hot Wheels, which rose 67% on a reported basis, while gross sales at the Barbie brand rose 46% on a reported basis. On Jun 22, Mattel introduced Crossed Signals, which is an electronic light and sound matching game for players aged 8 years and older.

Shares of Mattel have risen 25.2% year to date and it currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 16.7% over the past 60 days. The company’s expected earnings growth rate for the current year is 94.4%.

JAKKS Pacific, Inc. JAKK develops, produces and markets toys, consumables, and electronics and related products worldwide. In the second quarter of 2021, global net sales at the JAKKS Pacific’s Toys/Consumer Products segment increased 45% year over year. On Aug 13, the company along with Disney, announced the launch of Disney ily 4EVER 18-inch fashion doll line inspired by Disney stories and characters.

Shares of this Zacks Rank #2 company have risen 160.4% year to date. The Zacks Consensus Estimate for current-year earnings increased more than 100% over the past 60 days. The company’s expected earnings growth rate for the current year is more than 100%.

Hasbro, Inc.’s HAS U.S. and Canada segment markets and sells action figures, arts and crafts, and creative play products; electronic toys and related electronic interactive products; fashion and other dolls, and so on. In 2020, Hasbro’s e-commerce revenues reached over $1 billion for the first time. A Reuters article on Jul 26 mentioned that Hasbro is looking to ramp up its toy supply for the upcoming holiday season by expanding shipping operations and advancing product sourcing.

Shares of Hasbro have gained 6.3% over the past six months. The Zacks Consensus Estimate for its current-year earnings increased almost 9% over the past 60 days. This Zacks Rank #3 company’s expected earnings growth rate for the current year is almost 30%.



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