Thanks to the much-anticipated release of the film “Barbie,” top toy stocks – in particular Barbie creator Mattel (NASDAQ:MAT) – have enjoyed significant interest. For MAT stock, it bounced up nearly 17% since the start of the year. Most of the green ink arrived within the trailing month, where shares returned over 15% of equity value.
Of course, for those seeking stock market comeback plays, Mattel appears quite compelling. In the trailing one-year period, MAT remains down almost 8%. Therefore, it’s possible that shares may continue driving higher. At the same time, it’s also possible that Mattel has already benefitted from the buy-the-rumor, sell-the-news effect. If so, those investing in toy industry opportunities may want to consider other ideas.
Indeed, now might be an ideal time to consider consumer discretionary stocks in general. At this juncture, data regarding inflation demonstrates an encouraging (as in declining) trend while consumers are still opening their wallets. Over time, Federal Reserve policy may clamp down hard on inflation. But until that time, these toy stocks may offer lucrative upside.
Toy Stocks: Hasbro (HAS)
A global play and entertainment company, Hasbro (NASDAQ:HAS) represents an icon among top toy stocks. In addition to the underlying industry, Hasbro offers several consumer products as well as television, movies, digital gaming, music and virtual reality experiences, per its corporate profile. Since the beginning of this year, HAS gained a hair over 2%.
Admittedly, it’s not the most exciting idea. However, Hasbro might be more interesting for those specifically investing in toy industry opportunities because of its Star Wars licensing deal. As you know, the science-fiction franchise represents an economy onto itself. Plus, it offers organic gender-neutral offerings. On the other hand, Mattel’s Barbie is for girls. I don’t mean that pejoratively – I’m just pointing out the reality.
Interestingly, HAS trades at a forward earnings multiple of 14.12, which is undervalued. In contrast, MAT trades at a forward multiple of 18.2, which is near fair value. Thus, Hasbro makes a better candidate for stock market comeback plays. Finally, analysts peg HAS as a consensus moderate buy. Their average price target lands at $73.22, implying nearly 16% upside potential.
Build-A-Bear Workshop (BBW)
While Build-A-Bear Workshop (NYSE:BBW) might not immediately have the name-brand recognition of high-profile toy stocks, it’s awfully compelling because of its unique (as far as I’m aware) business model and attractive financial metrics. Per its public profile, Build-A-Bear specializes in interactive retail experiences, particularly in the creation of customizable stuffed animals. Since the start of the year, BBW fell nearly 8%. However, in the trailing year, it’s up over 35%.
Those banking on consumer discretionary stocks may find great value with Build-A-Bear. Currently, the company prints a three-year revenue growth rate on a per-share basis of 10.2%. This stat ranks better than 69.23% of its peers. As well, its EBITDA growth rate clocks during the same period at 67.7%.
Still, the market prices shares at a forward multiple of only 6.53. As a discount to projected earnings, BBW rates superior to 93.36% of the competition. Lastly, Small Cap Consumer Research’s Eric Beder believes BBW will hit $41 per share. If so, that implies over 81% upside potential.
Funko (FNKO)
Easily the riskiest idea among toy stocks on this list, Funko (NASDAQ:FNKO) is a leading pop culture consumer products company. Per its corporate profile, Funko designs, sources and distributes licensed pop culture products across multiple categories, including vinyl figures, action toys, board games, plush, apparel, housewares and accessories for consumers who seek tangible ways to connect with their favorite pop culture brands and characters.
If you want to know the truth, I thought Funko was for little kids and adult nerds. However, the brand features surprising reach. It’s just that Wall Street doesn’t quite care at the moment. Since the Jan. opener, FNKO slipped 28%. In the trailing one-year period, shares gave up 67% of equity value.
Unfortunately, the company suffers from a high debt load, fiscal instability and negative trailing-year operating and net margins. However, it does print a respectable three-year revenue growth rate of 7.1%. That’s better than nearly 72% of its peers. Analyst consensus pegs FNKO as a hold. However, the average price target happens to land at $14.67, implying over 88% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
