Three Toy Industry Stocks Worth Your Attention Amid Strong Market Momentum

The toy and games sector is experiencing robust growth driven by sustained demand for action figures, building sets, and increasingly, popular toys for girls like dolls and fashion accessories. Major players including Mattel, Inc. (MAT), Hasbro, Inc. (HAS), and JAKKS Pacific, Inc. (JAKK) are well-positioned to capitalize on these tailwinds. The Zacks Toys – Games – Hobbies industry, ranked #112 among 254 industries and placing it in the top 44%, is showing encouraging prospects for investors looking at growth opportunities.

What’s Driving the Toy Market Forward?

Several key factors are propelling this sector upward. First, the surge in at-home entertainment continues to fuel demand for traditional games and building sets. According to recent market data, U.S. toy sales climbed 16% in 2020, with sports toys, fashion dolls and accessories, and building sets posting impressive gains of 31%, 56%, and 26% respectively.

Educational toys represent another significant growth engine. Market analysts project this segment will reach $24.3 billion by 2024, growing at a compound annual growth rate of approximately 15%. Parents increasingly view educational play as a priority, reshaping purchasing patterns across the industry.

E-commerce has become a game-changer for major retailers. Companies that invested early in digital channels are reaping rewards—online revenues have surged, with leading firms generating over $1 billion in digital sales and achieving 43% year-over-year growth in some cases. This shift now represents nearly 30% of total global revenues for top performers.

Market Performance and Valuation Reality

The sector has delivered solid returns but trails broader benchmarks. Over the past year, the Zacks Toys – Games – Hobbies industry gained 36.4%, underperforming both the Consumer Discretionary sector (53.7%) and the S&P 500 (51.7%). On valuation metrics, the industry trades at 28.01X forward price-to-earnings—above the S&P 500’s 23.1X but below the Consumer Discretionary sector’s 33.26X.

Three Stocks to Watch

Mattel (MAT) – Zacks Rank #2 (Buy) This El Segundo-based toy giant commands the world market with its powerhouse brands. The Barbie line remains a flagship driver, capturing sustained demand from girls seeking fashion dolls and popular toys for girls that blend play with aspirational themes. Hot Wheels also continues its reign as the category leader across multiple segments. The company’s diversified portfolio of core brands and licensed properties positions it for continued expansion. Over six months, Mattel shares appreciated 58.4% versus the industry’s 15.4% gain. Earnings forecasts for 2021 project a 33.7% increase, with recent upward revisions of 5.4% in the past 60 days.

Hasbro (HAS) – Zacks Rank #3 (Hold) Operating from Rhode Island, Hasbro combines game design with content production through its E1 division. The company benefits from a robust gaming portfolio spanning face-to-face, off-board, and digital platforms. Its content pipeline includes productions for Netflix originals and franchises like Peppa Pig and My Little Pony. The one-year stock performance reached 30.4% growth, though slightly trailing the broader industry. Management projects 2021 earnings growth of 15%, with modest upward revisions of 0.9% over the past two months.

JAKKS Pacific (JAKK) – Zacks Rank #3 Based in California, JAKKS Pacific operates as a diversified toy and consumer products manufacturer with international ambitions. Strategic acquisitions and brand collaborations fuel growth—the company recently expanded into new categories like trampolines, opening fresh revenue streams. This diversification strategy supports the company’s push beyond U.S. borders. Six-month returns climbed 38.4%, with 2021 earnings projections suggesting a substantial 51% increase despite narrowing losses.

Why This Industry Matters Now

The Zacks Industry Rank indicates that top-performing industries outpace laggards by more than 2-to-1. Since year-end 2020, current-year earnings estimates for the Toys – Games – Hobbies group have moved higher by 4.6%, signaling analyst confidence. Supply chain challenges and elevated promotional costs remain headwinds, but companies successfully navigating these obstacles should see margin improvement ahead. For investors seeking exposure to secular demand trends and proven brand strength, these three companies merit close monitoring.