Here’s why JAKKS Pacific (JAKK) deserves a place in your portfolio
Despite the woes induced by the coronavirus, the actions of JAKKS Pacific, Inc. JAKK has done exceptionally well. In the past six months, the company’s shares have climbed 117%, compared to the industry7.5% growth. The company has benefited from strategic acquisitions, a strong international footprint, a focus on innovation and collaborations with popular brands and film franchisees.
Additionally, the consensus mark for 2021 earnings saw upward revisions to estimates, reflecting analyst optimism about the company’s growth potential. Over the past 30 days, Zacks’ consensus estimate for his 2021 loss has narrowed to 80 cents from a loss of $ 2.9.
Factors to note
The company enjoys strong demand for toys based on properties from video games such as Nintendo, Sonic the Hedgehog, and Apex Legends. In addition, the company has experienced solid growth in its outdoor seasonal division of ball pools, play structures, activity tables, scooters, skateboards and other spring-summer-inspired toys. Notably, this division’s sales were $ 18.3 million, up 43% from the $ 12.8 million recorded in the first quarter of 2020.
In the future, the company plans to launch the Encanto product line in the girls division, which includes fashion dolls, large dolls, playsets, fancy dress and role-playing. The pipeline also includes the expansion of its line of Perfectly Cute dolls and accessories at Target, a new launch of toys and collectibles based on Haribo (a global brand of gummy candy). In the boys division, the company intends to work on the Black and Decker product line as well as the re-release of Creepy Crawlers. The company believes that core commodities, popular entertainment licenses with proven gaming models will drive growth in 2021. Additionally, it expects strong Black & Decker gaming tools sales in 2021. Notably, classic toys based on tv shows and movies -scale figures based on boys action entertainment brands and preschool toys are preferred by children. Thus, they are expected to act as major catalysts.
Image source: Zacks Investment Research
JAKKS Pacific is committed to diversifying its presence outside of the United States. In line with its efforts, the company has opened sales offices and extended distribution agreements for its products. Its partnership with Meisheng is expected to result in robust growth in Asia. Meanwhile, after launching Tsum Tsum in major international markets like Latin America and Asia, the company plans to expand its distribution into new territories in the coming days.
Over the past few quarters, JAKKS Pacific has focused on creating digital experiences for online shoppers, such as videos, 360-degree product images, and enhanced web pages. It continues to modify its sales and logistics capabilities in order to capitalize on this continued evolution towards the Internet. During the first quarter of 2020, the company implemented a multi-level development program focused on the design and development of products specific to retail channels. This includes Walmart, Target, Amazon, Tesco, Etica and Aldi, TJ Maxx, Ross, Gamestop, among others. During the first quarter of 2021, the company’s online sales grew by more than 20% in 2020, which represented 17% of its total outlets with these customers.
JAKKS Pacific, which shares space with Mattel, Inc. CARPET, Hasbro inc. A and Activision Blizzard, Inc. ATVI, wears a Zacks Rank # 2 (Buy). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.
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