The air is crisp and chilly, leaves are starting to fall…and there are only 38 days to Black Friday! But fear not, we’ve got the stocks of two companies everyone else will be shopping at…so if you own them maybe you can afford your own happy holidays.
First, for the young and young at heart. I know I’ve attended quite a few holiday, and birthday parties myself at this one, Build-a-bear Workshop (BBW). Build-a-bear is taking its marketing a step further this holiday season with their own Christmas themed movie releasing in theaters November 3…Glisten and the Merry Mission (no charge for the promo BBW).
If you’ve never been to a Build-a-bear Workshop, or always wondered what went on in their stores as you passed it at the mall, BBW is in the business of, well, building bears.
The company runs brick-and-mortar stores where kids and adults alike can pick an animal (it doesn’t have to be a bear) and then purchase “options” such as clothing, an implanted device that makes your stuffed bear talk, or you can even deck your new stuffed animal out in your favorite sports team's gear.
Build-a-bear operates over 500 of these physical locations, many in malls, as well as an online store where you can “build” your stuffed animal via an interactive 3D workshop and have it delivered right to your door.
And, if you think building bears isn’t a great business, well, you’re not smarter than the average bear. In its latest quarter BBW reported a diluted EPS increase of 50% YoY, and total revenue of $109 million. From its pandemic low of $1.01, the stock has come roaring (or should I say growling) back, and is up over 2,700%.
In commenting on the earnings, Sharon Price John, President and CEO Chief Executive Officer said, “Our eighth consecutive quarter of record revenue results demonstrates the evolution of our business model leveraging the power and the broad appeal of the Build-A-Bear brand. Our digital transformation has further enabled us to expand the Company’s addressable market to include gifting and collectibles, with 40% of sales now generated by teens and adults.”
BBW currently rates an overall B in our POWR Ratings. Its Quality rating is near the very top of that component with a 99.25% rating out of all the stocks we track.
Build-a-bear should power through this holiday season with no lumps of coal for any of its executives.
Let’s move from the warm and fuzzy teddy bear, to the cold and digital…video game! Electronic Arts (EA) has been a dominant player in the field, and you can bet there will be a lot of joy this year opening the brand new Madden, FIFA, Need for Speed, and Star Wars games.
With EA Sports FIFA, soccer is already the most watched sport globally and growing rapidly (still) in the U.S., EA has a huge hit on its hands.
In the most recent quarter, the game had its biggest quarter in EA history, and according to EA’s press release, “FIFA Mobile attracted over 65 million new players in the quarter alone. FIFA Online produced double-digit growth across monthly, weekly and daily average users.”
Net bookings for the latest quarter were up 21% YoY, and totaled $1.6 billion. And the company is using cash to repurchase shares, $325 million in the latest quarter alone, to enhance shareholder value. Over the past 12 months Electronic Arts retired 10.5 million shares at a cost of $1.3 billion.
EA has gross margins of over 73%, and trades at 4.6 times sales. The stock is coming off a nice base in the $120 area, and is currently trading just over $130. If it can clear the $140 area, the top of its recent trading range, it could move substantially higher.
In our POWR Ratings EA currently has an overall score of A, outpacing over 95% of the companies we track. EA’s highest score is on the quality component.
These two stocks have the market covered on the gift buying scale this holiday season, with a demographic that basically ranges from 1 to 100 years old. And, both of these companies have tremendously strong brands that they continue to build out and innovate.
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BBW shares were trading at $27.63 per share on Tuesday morning, down $0.00 (0.00%). Year-to-date, BBW has gained 15.90%, versus a 15.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Steven Adams
After earning a law degree cum laude with a focus on securities law, Steven worked as a Nasdaq market maker for a large broker dealer, and then as a trader for an arbitrage focused proprietary hedge fund. He subsequently worked as a consultant for a Fortune 500 consulting firm serving both government and commercial clients, including the NYSE, Prudential, FDIC, and NASA.
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