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, ranging from traditional action figures to video game platforms and military simulation games [2] Trends Impacting the Industry - STEM toys are gaining popularity as parents seek educational experiences that promote problem-solving and creativity, with significant growth potential in markets like China and Brazil [3] - Industry participants are expanding their presence in emerging markets in Eastern Europe, Asia, and Latin and South America, which offer greater revenue growth opportunities compared to developed markets [4] Sales and Market Performance - U.S. toy industry sales increased by 6% with a 3% rise in units sold through April 2025, driven by strong adult demand for trading cards and building sets, with adult buyers spending $1.8 billion in Q1 2025 [5] - The Zacks Toys – Games – Hobbies industry has outperformed the S&P 500 Index, rallying 13.4% compared to the S&P 500's 11.9% increase [9] Cost and Valuation Concerns - The industry faces cost inflation due to rising raw material prices and higher employee-related expenses, prompting firms to launch new products and shift towards technology-driven toys [6] - The industry is currently trading at a forward P/E of 13.05X, lower than the S&P 500's 21.94X and the sector's 19.89X, indicating potential undervaluation [12] Company Performance - JAKKS Pacific is benefiting from its Freight on Board business model and licensing initiatives, with shares gaining 18.9% in the past year and projected earnings growth of 9.5% for 2025 [15][22] - Mattel has seen strong performance from brands like Disney Princess and Barbie, with shares up 8% in the past year and 2025 earnings expected to remain stable at $1.62 [18][19] - Hasbro is experiencing growth from its MAGIC ecosystem and licensing operations, with shares increasing by 13.4% in the past year and a projected earnings increase of 5.2% for 2025 [21][22]