3 Toys & Games Stocks Poised to Benefit From Industry Tailwinds

Industry Description

The Zacks Toys-Games-Hobbies industry comprises companies that design, manufacture and sell various games and toys. While traditional toymakers primarily focus on marketing and selling action figures, accessories, dolls, youth electronics, and arts and crafts, other industry players develop and market content and services on video game consoles, personal computers and mobiles. Some industry participants offer video game platforms, playing cards, Karuta and other products, as well as handheld and home console hardware systems and related software. Some companies develop and operate retail and online military simulation games, and offer both multi and single-player games.

4 Trends Shaping the Future of Zacks Toys - Games - Hobbies Industry

Licensed Franchises Continue to Drive Consumer Demand: Licensing remains one of the strongest growth engines for the Toys industry. Partnerships with major movie studios, streaming platforms, gaming companies and sports organizations enable toy manufacturers to capitalize on popular characters and franchises through action figures, dolls, board games and collectibles. Frequent content releases help sustain consumer interest, while established in-house brands continue to attract loyal customers. By regularly refreshing product assortments and expanding franchise-based offerings, companies are well positioned to generate repeat purchases and strengthen their competitive positions.

STEM Toys Gaining Popularity: Growing emphasis on educational and skill-based play is boosting demand for STEM (science, technology, engineering and mathematics) toys. Parents are increasingly seeking products that promote creativity, critical thinking and problem-solving while keeping children engaged. In response, manufacturers are expanding their portfolios with coding kits, robotics, construction sets and interactive learning toys. This fast-growing category allows companies to diversify their offerings, appeal to education-conscious families and capture opportunities in the premium toy segment.

Focus on Emerging Markets Supports Growth: Emerging economies present a significant growth opportunity for the Toys industry, driven by rising household incomes, expanding middle-class populations and increasing spending on children's products. The rapid growth of organized retail and e-commerce is making branded toys more accessible across these markets. Manufacturers are also investing in localized product offerings, broader distribution networks and strategic partnerships to strengthen their presence. Continued expansion in these underpenetrated regions is expected to support long-term revenue growth and reduce dependence on mature markets.

Tariffs and Cost Pressures Remain Key Challenges: Despite favorable industry trends, toy manufacturers continue to face headwinds from tariffs, higher input costs and supply-chain uncertainties. Since many toys are sourced or manufactured overseas, changes in trade policies and import duties can increase production costs and pressure profit margins. At the same time, persistent inflation and cautious consumer spending may weigh on demand for discretionary products, particularly during periods of economic uncertainty. Companies will likely need to balance pricing actions with operational efficiencies to protect profitability while remaining competitive.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Toys-Games-Hobbies industry is grouped within the broader Zacks Consumer Discretionary Sector.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects.

The Zacks Toys-Games-Hobbies industry currently carries a Zacks Industry Rank #24, which places it in the top 10% of 245 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

Before we present a few stocks for investors to consider, let us analyze the industry’s recent stock-market performance and valuation picture.

Industry Underperforms the S&P 500

The Zacks Toys-Games-Hobbies industry has underperformed the S&P 500 index. The industry has gained 8.4% over this period compared with the S&P 500’s rise of 24.5%. In the same time frame, the sector has declined 12%.

1-Year Price Performance

Industry's Current Valuation

Comparing the industry with the S&P 500 index based on forward 12-month price-to-earnings, which is a commonly used multiple for valuing the industry, we see that the industry is trading at 10.23X, lower than the S&P 500’s 20.79X and the sector’s 19.89X.

Over the past five years, the industry traded as high as 18.15X and as low as 9.64X, with the median being 13.13X, as the chart shows.

P/E (F12M)

3 Zacks Toy Stocks to Keep an Eye On

Hasbro: The company is likely to benefit from the continued strength of its trading card and tabletop gaming business, growing digital revenues and healthy demand for franchise-based products. MAGIC: The Gathering remains a key growth driver, supporting sales and profitability.

Shares of this Zacks Rank #2 (Buy) company have gained 18.14% in the past year. The company’s 2026 earnings are likely to witness a year-over-year increase of 10.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price & Consensus: HAS

JAKKS Pacific: The company is expected to benefit from a robust lineup of licensed toys tied to popular entertainment franchises, new product introductions and a growing presence in collectibles. Broader retail distribution and disciplined execution should also support the company's growth prospects.

Shares of this Zacks Rank #2 company have gained 55.1% in the past year. The company’s 2026 earnings are likely to witness a year-over-year increase of 54.3%.

Price & Consensus: JAKK

Mattel: The company is expected to benefit from sustained demand for its core franchises, including Hot Wheels and Barbie, alongside growth in digital gaming and licensing initiatives. Continued product innovation, brand investments and an expanding entertainment ecosystem should help the company strengthen consumer engagement and support long-term revenue growth. 

Shares of this Zacks Rank #3 (Hold) company have declined 15.4% in the past year. The company’s 2026 earnings are pegged at $1.34, indicating a year-over-year decline of 5%.

Price & Consensus: MAT

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This article originally published on Zacks Investment Research (zacks.com).

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