Investing in Lego: A Review of the Iconic Toy Company’s Stock and Investment Potential
Lego stock is one of the most iconic and beloved toy brands in the world, known for its colorful interlocking plastic bricks that can be assembled into a variety of creations. However, as a privately-held family company based in Denmark, Lego’s stock is not available to purchase on public markets. This leaves investors wondering – is there still a way to invest in this hugely popular toymaker?
In this comprehensive review, we will analyze Lego’s financial performance, brand value, competitive advantages, and future growth prospects. We will also explore different options for investors who want exposure to the Lego brand and the toy industry at large.
An Overview of The Lego Group
Lego was founded in 1932 by Danish carpenter Ole Kirk Kristiansen. What began as a small workshop making wooden toys evolved into plastic bricks and playsets that captured children’s imaginations around the globe. Today, Lego is the largest toy company in the world by revenue, reporting over $8 billion in sales in 2021 .
Lego is still family-owned, with the Kristiansen family and affiliates holding a 75% stake while the Lego Foundation, a charity focused on children’s creativity and education, owns the remaining 25% []. Under this private ownership structure, Lego has prioritized steady long-term growth over short-term profits.
The company is now led by Niels Christiansen, who became CEO in 2017. Under his leadership, Lego has continued to increase sales and profits through new product launches, expanded production capacity, and growing its presence, especially in China.
Financial Performance and Brand Value
As a private company, Lego does not release as much financial data as public companies. However, the numbers that are available demonstrate Lego’s strength as a business :
- Sales in 2021 totaled over $8 billion, up 27% from 2020. Profits also rose sharply by 140% in 2021.
- Lego has achieved an impressive 16% average yearly sales growth rate from 2016-2021.
- Lego’s brand value is estimated at $9.6 billion as of 2022, making it the world’s most valuable toy brand.
Behind these financials lies a powerful brand with intergenerational appeal and deep loyalty amongst kids and adult fans alike. Lego has successfully evolved its product lineup beyond basic brick sets to remain relevant, with popular licensed themes like Star Wars and Harry Potter as well as a fast-growing media division.
According to YouGov, Lego ranked #9 on a global list of consumer companies by reputation and trust. This brand strength drives consistent sales even during economic downturns.
Lego possesses several key competitive strengths:
Iconic Brand Status – Lego sits alongside major consumer brands like Apple and Nike in terms of brand familiarity and loyalty. This gives Lego pricing power and insulation against market fluctuations.
Innovation – By continually evolving its bricks and playsets while preserving backwards compatibility, Lego maintains an edge over copycats. Lego holds hundreds of patents on its unique bricks and minifigures.
Global Supply Chain – With factories in Mexico, Hungary, China and Denmark, Lego has expanded production capacity to keep up with demand. Lego is also increasing its number of certified stores globally.
Media Exposure – Movies like The Lego Movie and Lego Masters reality TV competitions provide constant brand visibility and exposure to new audiences.
Lego Stock – Growth Prospects and Strategies
Lego still has plenty of room to grow despite already being the #1 toy company. Key growth opportunities include:
- Emerging Markets – Lego is rapidly expanding in China, which is now its second biggest market. Other Asian countries also represent growth potential.
- Ecommerce – Lego is increasing online sales, which now make up nearly 20% of total revenue. Lego can leverage ecommerce to access more customers.
- New Products – Lego continually releases fresh new sets, with over 60 new products launched just in the first half of 2022 . Frequent launches keeps the brand popular.
- Sustainability – Lego aims to use 100% sustainable materials in products and packaging by 2030 . An eco-friendly focus appeals to modern consumers.
If executed well across these fronts, analysts project Lego can sustain between 4-6% yearly revenue growth over the next decade.
Can You Invest in Lego Stock?
Since Lego is a private family-owned company, its shares do not trade on any public exchange. Therefore, unfortunately investors cannot directly buy stock in Lego. The company has given no indications it plans to IPO.
However, just because you can’t invest in Lego stock doesn’t mean there aren’t still ways to gain exposure to this powerful brand and the toy industry:
1. Buy Lego Products
Investors can buy Lego products, hold unopened sets in pristine condition, then resell them years later for a profit. Rare, retired Lego sets in particular have generated high returns. For example, a 2007 Millennium Falcon set that originally retailed for $500 now sells for over $4,000 sealed-in-box.
However, this strategy requires proper set selection, storage, and timing. Risks include new editions being released or Lego reissuing popular sets.
2. Invest in Competitor Stocks
Publicly-traded toy companies like Mattel, Hasbro, and Funko allow investors to gain exposure to industry trends that also benefit Lego:
- Mattel (NASDAQ: MAT): Owns popular brands such as Barbie, Hot Wheels, Fisher-Price and American Girl.
- Hasbro (NASDAQ: HAS): Major player with brands including Nerf, My Little Pony, Monopoly and Transformers.
- Funko (NASDAQ: FNKO): Produces licensed pop culture collectibles and figures.
These stocks can serve as proxies for investing in Lego, which outpaces most competitors in growth and margins. Just be aware of risks facing the overall toy industry, like supply chain issues and economic sensitivity.
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3. Invest in Lego-Related Movies
Hits like The Lego Movie have exceeded $450 million in box office revenue , enabling Warner Bros. to plan future sequels and spinoffs. Warner Bros. is owned by media conglomerate Warner Bros. Discovery (NASDAQ: WBD), providing investors a way to potentially profit from Lego’s success in Hollywood.
Investing in entertainment companies with exposure to Lego represents another alternative, albeit indirect, route. Just remember the inherent risks of betting on movie performance at the box office.
4. Consider a Thematic ETF
Some thematic ETFs based around consumer trends have allocated 1% or more to Lego stock due to its brand influence and loyalty. For example, the Fidelity Metaverse ETF (FMET) and the Roundhill MEME ETF (MEME) both currently hold positions in unregistered Lego OTC shares.
While Lego’s weighting is small, these creative ETFs offer a way to gain portfolio exposure to this beloved toymaker. Just be cautious of the speculative nature of some thematic funds.
Conclusion: Lego Stock Presents Intriguing Investment Potential
In summary, Lego is an exceptional company – the world’s most profitable toy maker with a high-value brand and stellar growth. The stock would undoubtedly be in high demand if Lego ever did go public.
While you can’t directly invest in Lego today, alternative options exist to capitalize on Lego’s continued expansion in toys, media, and retail. The Lego Group should maintain its status as the gold standard in toys for the foreseeable future.