3 Toys & Games Stocks to Keep an Eye on Amid Rising US Sales

The Zacks Toys-Games-Hobbies industry is experiencing growth, driven by demand for STEM toys and expansion in emerging markets, with U.S. toy sales up 6% through April 2025 fueled by adult collectors; stocks like JAKKS Pacific, Mattel, and Hasbro are expected to benefit. Despite rising raw material and labor costs impacting the industry, companies are innovating with technology-driven toys and digital components to boost sales. The industry currently holds a Zacks Industry Rank #6, indicating strong near-term prospects, and is trading at a forward 12-month P/E of 13.05X, lower than the S&P 500's 21.94X.

Analysis

The Zacks Toys - Games - Hobbies industry demonstrates a promising near-term outlook, evidenced by its Zacks Industry Rank #6, placing it in the top 14% of 244 Zacks industries, and its notable 13.4% market rally, which has outpaced the S&P 500's 11.9% increase. From a valuation perspective, the industry appears relatively attractive, trading at a forward 12-month price-to-earnings (P/E) ratio of 13.05X, substantially lower than the S&P 500’s 21.94X and the sector's 19.89X, as well as its own 5-year median of 14.34X. Key growth drivers include the increasing popularity of STEM toys, strategic expansion into emerging markets such as China and Brazil, and a significant 6% rise in U.S. toy industry sales (accompanied by a 3% increase in units sold) through April 2025, according to Circana reports. This U.S. sales growth is notably fueled by robust adult demand, particularly for trading cards and building sets, with adult buyers spending $1.8 billion in the first quarter of 2025 alone. Industry participants are further adapting by developing digital-play components and refining marketing initiatives. However, the sector contends with significant headwinds from cost inflation, stemming from increased raw material prices and higher employee-related expenses, which pose a risk to profitability despite new product launches and a shift towards technology-driven toys. Among specific companies, JAKKS Pacific (JAKK), holding a Zacks Rank #1 (Strong Buy), has seen its shares appreciate by 18.9% over the past year and is projected to achieve a 9.5% year-over-year earnings increase in 2025. Hasbro (HAS), a Zacks Rank #3 (Hold), has experienced a 13.4% share price gain and forecasts a 5.2% earnings increase for 2025. Mattel (MAT), also a Zacks Rank #3, saw an 8% share increase but anticipates flat year-over-year earnings for 2025.

Key Decisions for Investors

• Investors could evaluate opportunities within the Toys - Games - Hobbies industry, given its recent market outperformance and comparatively lower forward P/E ratio, while carefully monitoring the persistent challenge of rising operational costs and their impact on margins.
• Prioritize companies demonstrating robust growth strategies aligned with key trends such as STEM toys, the burgeoning adult collectibles market, digital innovation, and successful expansion into emerging markets; JAKKS Pacific, with its Zacks Rank #1 and projected 9.5% earnings growth for 2025, exemplifies such potential.
• Closely assess individual stock performance, particularly Mattel's ability to convert brand strength from properties like Disney Princess, Hot Wheels, and Barbie into bottom-line growth against its flat 2025 earnings forecast, and Hasbro's execution of strategic initiatives including sourcing diversification and targeted pricing to achieve its 5.2% earnings growth target for 2025.
• Track the sustainability of U.S. toy sales growth, especially within the adult collector demographic, and observe how companies are navigating consumer price sensitivity and potential tariff concerns, which are influencing purchasing decisions between premium and value-priced toys.