Yahoo Finance Zacks Industry Outlook Highlights Activision Blizzard, Take-Two Interactive Software and Hasbro
For Immediate Release
Chicago, IL – May 23, 2023 – Today, Zacks Equity Research discusses Activision Blizzard, Inc. ATVI, Take-Two Interactive Software, Inc. TTWO and Hasbro, Inc. HAS.
Industry: Toys & Games
Link: https://www.zacks.com/commentary/2098031/3-toys-games-industry-to-watch-despite-industry-gloom
The Zacks Toys - Games – Hobbies industry is reeling under cost inflation. Decline in retail sales of toys is a concern for the industry. Nevertheless, robust performance of smart toys, STEM toys (Science, Technology, Engineering and Math), sports toys and fashion dolls and accessories bodes well. The industry participants have been undertaking efforts on the digital front and focusing on better execution of marketing and promotional initiatives to drive growth. The industry players, including Activision Blizzard, Inc., Take-Two Interactive Software, Inc. and Hasbro, Inc. are likely to gain from the aforementioned trends.
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 mobile. Some industry participants offer video game platforms, playing cards, Karuta and other products along with handheld and home console hardware systems and related software. A few companies also develop and operate retail and online military simulation games and provide multiplayer and single-player games.
3 Trends Shaping the Future of Zacks Toys - Games ??? Hobbies Industry
High Costs Remain Concerns: Cost inflation had a negative impact on the industry due to a rise in raw materials prices. Temporary store closures in some parts of the world, product shortages, lower retail inventories and supply chain disruption have been denting the industry’s performance. Higher employee-related expenses are also hurting the industry. The companies have been resorting to product launches and shifting toward more technology-driven toys to boost sales, which might drive profits in the long haul. However, costs related to the initiatives may prove detrimental to the industry in the near term.
Dismal Toys Retail Sales: Toy sales declined in 2022. Per NPD Group, U.S. retail sales of toys declined 0.2% in 2022. Unit sales declined by 4%, whereas average selling price came in at $12.68, up 3% year over year. Toy industry growth contributed to a three-year compound annual growth rate (CAGR) of 10%, aided by average selling price and unit sales growth of 5% and 2%, respectively. The industry performance in 2022 was hurt by inflationary pressure, rising interest rates, weather distributions and concern regarding new COVID variant threat.
STEM Toys Gaining Popularity: Amid declining sales of traditional toys, the robust demand for STEM toys has come as a breather. The Asia Pacific region emerged as a major growth driver for STEM toys. Countries like India, Malaysia, Singapore and Thailand are witnessing rising demand for STEM toys. Parents are focusing more on educational toys to teach their children.
The industry players have been capitalizing on new distribution methods, development of digital-play components, exploration of ventures with other industries and focusing on international expansion to drive growth. The industry has enormous growth potential in China and Brazil as countries have a massive population of kids aged zero to 14 years.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Toys – Games – Hobbies industry is grouped within the broader Zacks Consumer Discretionary Sector.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dismal near-term prospects.
The Zacks Toys – Games – Hobbies industry currently carries a Zacks Industry Rank #208, which places it in the bottom 17% of 251 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. Since Nov 30, 2022, the industry’s earnings estimates for the current year have moved south by 11.2%.
Before we present a few stocks that investors can take a look at, let’s 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 decreased 1.5% over this period against the S&P 500 gain of 5.9%. In the same time frame, the sector has declined 0.5%.
Industry's Current Valuation
Comparing the industry with the S&P 500 Index on the basis of forward 12-month price-to-earnings, which is a commonly used multiple for valuing the industry, we see that the industry is trading at 22.31X, higher than the S&P 500’s 18.68X but lower than the sector’s 18.07X.
Over the last five years, the industry has traded as high as 31.97X and as low as 19.37X, with the median being 25.45X.
3 Zacks Toys Stocks to Keep an Eye On
Activision Blizzard: Headquartered in Santa Monica, CA, Activision Blizzard is as leading developer and publisher of console, online and mobile games. Activision Blizzard has been eyeing the lucrative e-sports market. With consistent increases in viewership, corporate sponsorships and growing media coverage, e-sports is here to stay.
Shares of this Zacks Rank #3 (Hold) company have inched up 1.8% in the past year. Its earnings for 2023 are anticipated to increase 17.3%. In the past 60 days, the earnings estimate for 2023 has been revised upward by 1.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Take-Two Interactive Software: Based in New York City, Take Two Interactive Software is a leading developer and publisher of video games. Take Two’s top line is gaining from strong digital revenues, driven by solid demand for well-known game franchises like GTA, Red Dead Redemption and NBA. Zynga acquisition establishes Take-Two as one of the largest publishers of mobile games.
Shares of this Zacks Rank #3 company have declined 31.9% in the past year. In 2023, the company’s sales are likely to witness growth of 25.7% year over year.
Hasbro: Based in Pawtucket, RI, Hasbro Inc. is engaged in the design, manufacture and marketing of games and toys. The company is benefiting from higher contributions from top brands like MAGIC: THE GATHERING and Wizards of the Coast and the Digital Gaming segment. Also, focus on eOne content and the initiation of the Operational Excellence program bode well.
Shares of this Zacks Rank #3 company have plunged 29% in the past year. The company’s earnings in 2023 is likely to witness an increase of 0.2%. In the past 30 days, the earnings estimate for 2023 has been revised upward by 1.8%.
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Activision Blizzard, Inc (ATVI) : Free Stock Analysis Report
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