The holiday shopping season has arrived. This is the time of year when toy and game stocks have the potential to explode. According to NPD Group, sales in the toy industry are up nearly 10% in the first half of 20 in more than a dozen markets the organization is following closely.
Toy sales in the United States are particularly strong, growing over 15% in 20. Industry analysts believe children who spend more time at home during pandemic shutdowns are partly responsible for increased sales.
Mattel (MAT) and Hasbro (HAS) are two of the major toy stocks. While conventional toys aren’t as popular as they were decades ago due to the boom in video games, they still sell out pretty quickly, especially around Christmas time.
Let’s take a look at MAT and HAS to help investors determine which toy stock is best for their portfolio.
MAT is responsible for top selling toys such as Polly Pocket and Hot Wheels. However, MAT has struggled to keep pace with HAS over the past two years. MAT’s net sales have seen a decline over the past half-decade, not leveling off until last year after a change in leadership. The rise of digital entertainment has made it difficult for MAT to generate meaningful and lasting interest from young people.
Add to that the fact that the pandemic has closed many retail stores where MAT products are sold and things have gotten even more difficult for the toy maker. Overall, MAT’s revenue decreased by almost 15% in the first half of ’20 compared to the first half of ’19.
Although MAT is clearly in trouble, the brand is seeing renewed interest in its Barbie toys. In addition, MAT is making great strides in expanding its e-commerce business. If MAT continues to reduce operating costs and maintain its current growth rate, there is reason to argue for a bullish future.
HAS has been in business for almost a century. Examples of HAS products include My Little Pony, Power Rangers, and Playdoh. Much of the appeal of investing in HAS is the company’s transition to the digital realm. As an example, My Little Pony is available as a show, and the company has produced half a dozen Transformers movies over the past 10 years.
HAS has moved more than two dozen products to live productions through the company’s own studio. Company executives have made it clear that HAS will move even more towards digital games and entertainment in the new year. It’s the type of flexibility investors love to hear just because our world is getting more and more dynamic every second.
Add to that the fact that HAS is the Official Disney Toy Dealer (DIS) and there is even more reason for investors to consider positioning themselves in this toy business. However, HAS experienced year-over-year revenue cuts throughout ’20. The only silver lining in HAS’s latest earnings report is revenue growth for its gaming segment and franchise brands of 3% and 4%, respectively.
Based on the information presented above, it looks like HAS is the better of the two toy makers. However, we would be remiss if we disregard each company’s POWR ratings.
POWR ratings reveal that MAT has “A” ratings in the Trade Grade, Industry Rank, and Buy & Hold Grade components. In total, MAT is ranked fifth out of 15 publicly traded companies in the Entertainment – Toys and Video Games category.
Alternatively, HAS has an “A” rating in the POWR assessment component of the industry ranking as well as a “B” component of commercial grade. HAS is ranked sixth in the sector.
The better of the two titles will likely prove to be the one that makes a more successful transition to the digital realm. Right now, it looks like HAS is performing slightly better than MAT in the digital space. Get on the HAS train, ride during the holidays until 9 pm and you will probably have a fantastic start to the year.
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MAT shares fell $ 17.84 (-100.00%) in trading before market on Thursday. Year-to-date, MAT has gained 33.21%, compared to a 17.17% increase in the benchmark S&P 500 over the same period.
About the Author: Patrick Ryan
Patrick Ryan has over a dozen years of investment experience, particularly in the information technology, consumer and entertainment industries. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. Following…