The holiday shopping season is here. This is the time of the year when toy and gaming 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 across more than a dozen markets the organization closely tracks.
 
Toy sales in the United States are especially high, enjoying more than 15% growth in '20. Industry analysts believe kids spending more time at home during the pandemic lockdowns is partially responsible for the hike in sales.
 
Mattel (MAT) and Hasbro (HAS) are two of the top toy stocks. Though conventional toys are no longer as popular as they were decades ago due to the rise of video games, they still sell quite briskly, especially around Christmas.
 
Let’s delve into MAT and HAS to help investors determine which toy stock is better for their portfolio.
 
Mattel (MAT)
MAT is responsible for top-selling toys such as Polly Pocket and Hot Wheels. However, MAT has found it quite difficult to keep pace with HAS in the past couple of years. MAT’s net sales have been on the downswing across the prior half-decade, failing to stabilize until this past year after a leadership change. The rise of digital entertainment has made it challenging for MAT to generate significant and lasting interest from youngsters.
Add in the fact that the pandemic closed many retail stores where MAT products are sold and things have become even more challenging for the toymaker. All in all, MAT’s revenue has declined by nearly 15% in the first half of ’20 compared to the first half of ’19.
Though MAT is clearly struggling, the brand is enjoying an uptick in interest in its Barbie toys. Furthermore, the MAT is making strides in expanding its e-commerce business. If MAT continues to decrease operating costs and maintains its current growth rate, there is a case to be made for a bullish future.
Hasbro (HAS)
HAS has been in business for nearly an entire century. Examples of HAS products include My Little Pony, Power Rangers, and Playdoh. A large part of the appeal of investing in HAS is the company’s transition to the digital realm. As an example, My Little Pony is available in show form and the company has produced half a dozen Transformers movies across the past 10 years.
 
HAS has shifted more than two dozen products to live-action productions through the company’s own studio. Company executives have made it clear HAS will pivot even more toward digital gaming and entertainment in the new year. This is the type of flexibility investors love to hear simply because our world is becoming increasingly dynamic by the second.
Add in the fact that HAS is the official merchandisers of Disney (DIS) toys and investors have all the more reason to consider establishing a position in this toy company. However, HAS has suffered reductions in year-over-year revenue throughout ’20. The only silver lining in HAS’s latest earnings report is the spike in revenue for its gaming segment and franchise brands of 3% and 4%, respectively.
The Verdict
Based on the information presented above, it appears as though HAS is the better of the two toymakers. However, we would be remiss not to consider each company’s POWR Ratings.
The POWR Ratings reveal MAT has "A" grades in the Trade Grade, Industry Rank, and Buy & Hold Grade components. All in all, MAT is ranked fifth of 15 publicly traded companies in the Entertainment - Toys & Video Games category.
Alternatively, HAS has an "A" grade in the Industry Rank POWR Rating component along with a "B" Trade Grade component. HAS is ranked sixth in the sector.
The better of the two stocks will likely turn out to be the one that makes a more successful segue to the digital realm. At the moment, it appears as though HAS is performing slightly better than MAT in the digital space. Hop on the HAS train, ride it through the holidays on into ’21 and you are likely to enjoy a fantastic start to your new year.
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MAT shares fell $17.84 (-100.00%) in premarket trading Thursday. Year-to-date, MAT has gained 33.21%, versus a 17.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management.
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