2 Stocks Gaining Traction in the Promising Toys & Games Industry

Industry Overview - The Zacks Toys - Games - Hobbies industry is experiencing robust demand for smart toys, STEM toys, sports toys, and fashion dolls and accessories, with companies focusing on digital initiatives and marketing strategies to drive growth [1][3] - The industry includes companies that design, manufacture, and sell various games and toys, with a mix of traditional toymakers and those involved in video game content and services [2] Trends - STEM toys are gaining popularity, particularly in the Asia Pacific region, with countries like India, Malaysia, Singapore, and Thailand seeing increased demand as parents prioritize educational toys [3] - Industry participants are focusing on emerging markets in Eastern Europe, Asia, and Latin and South America for revenue growth opportunities [4] Challenges - The industry faces cost inflation due to rising raw material prices and higher employee-related expenses, which may impact profitability despite efforts to launch new products and shift towards technology-driven toys [5] Industry Performance - The Zacks Toys - Games - Hobbies industry currently holds a Zacks Industry Rank of 3, placing it in the top 1% of 250 Zacks industries, indicating bright near-term prospects [6][7] - The industry has underperformed the S&P 500 Index, growing 17.9% compared to the S&P 500's 26.9% increase [10] Valuation - The industry is trading at a forward 12-month price-to-earnings ratio of 22.85X, higher than the S&P 500's 22.37X and the sector's 16.63X [12] Company Highlights - JAKKS Pacific is benefiting from product expansions and collaborations, with a promising lineup of new products tied to popular franchises expected to generate significant consumer interest [13] - JAKKS Pacific shares have surged 64.2% in the past six months, with earnings estimates for 2025 revised 7.1% upward [14] - Mattel is expected to benefit from its Optimizing for Profitable Growth program and strong demand for Hot Wheels, with anticipated growth driven by product innovations and enhanced marketing efforts [17]