While the toy-manufacturing industry obvious targets young kids, they also enjoy a robust market for kids at heart, thus highlighting the opportunities in toy stocks. Easily, what’s most compelling about this particular topic is the suddenly expanded addressable market.
Primarily, an investor would ordinarily consider demographic data to identify upside prospects in toy stocks. After all, large families with young children present a prime tailwind. However, toy companies are also noticing that thanks to dynamics related to socialization and nostalgia, an increasing number of adults are buying their products. That’s a huge boost that simply didn’t exist years ago.
Further, as these young-at-heart consumers increase in purchasing power, they’re able to acquire even more goodies. It may be an odd ecosystem. But don’t overlook these toy stocks as they could potentially deliver the goods.
Nintendo (NTDOY)
When it comes to toy stocks thriving on nostalgia, Nintendo (OTCMKTS:NTDOY) ranks among the top ideas to consider. Older millennials – and even younger ones – should be quite familiar with the gaming console brand. Indeed, the company before the Covid-19 pandemic changed everything has been banking on the magic of nostalgia marketing.
It sounds silly today with downloaded games and the burgeoning ecosystem of esports. However, back during Nintendo’s heyday, people were very much tethered to the physical realm. When games didn’t work quite right, you would have to take the gaming cartridge out and blow on it to remove the dust. Again, it sounds ridiculous but that’s how kids rolled during that era.
Still, that “tactile” memory may have further evoked nostalgic emotions, making NTDOY a surprisingly solid idea for toy stocks. Analysts rate shares a consensus moderate buy although they’re hesitant to list a price target. In the trailing six months, NTDOY soared over 31%.
Mattel (MAT)
One of the top toy manufacturers in the world, Mattel (NASDAQ:MAT) has a new client base: fully grown adults. You see, Mattel owns the popular Hot Wheels brand of toy cars. At some point, practically every kid owned one of the pint-sized vehicles. However, most of us were not fortunate enough to be born to super-rich or super-indulgent parents. So, we made do with what we had.
Several years down the line, however, the current adults still harken back to their childhood days. Not only that, many of them have become avid collectors of rate Hot Wheels. Some sets are worth the price of exotic road cars (as in, the real kind). With the nostalgia market running sky high these days, MAT could be an intriguing idea for toy stocks.
Even better, shares appear to be undervalued, trading at only 13.64X forward earnings. That’s lower than the sector median 16X. Also, analysts peg MAT stock a consensus moderate buy with a $22 price target, projecting almost 12% growth.
Hasbro (HAS)
When discussing toy stocks geared toward adult nostalgia – or just adults in general – Hasbro (NASDAQ:HAS) ranks as the end-all, be-all. At first, the concept of fully grown human beings buying toys for themselves struck me as bizarre. But then, I remembered the Star Wars franchise and the fandom tied to it.
Who makes Star Wars toys? You guessed it. Hasbro.
Then I thought about the social element surrounding this particular narrative of toy stocks. Young adults love to get together for casual entertainment. And what better way to facilitate the fun than with board games? The most popular that immediately came to my mind was Monopoly. Originally acquired by Parker Brothers, this company was itself acquired by – you already know – Hasbro.
Still, dominance comes at a cost. Currently, shares trade at a forward yield of 15X, which is not as attractive of a deal as Mattel. Nevertheless, analysts rate HAS stock a consensus moderate buy with a $56.13 price target, implying 12% upside.
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.
