Goldman Sachs Projects 100% Upside In Funko

Notwithstanding Funko Inc FNKO's poor performance as a public company since its Nov. 2 listing, analysts are still upbeat about this pop culture consumer products company.

The Analyst

Goldman Sachs analyst Michael Ng initiated coverage of Funko with a Buy rating and a $16 price target — nearly a 100 percent upside from current levels.

The Thesis

Funko is "levered to growth in media consumption through licensing, manufacturing and sale of pop culture figures and accessories," Ng said in a Monday note.

Funko is well-positioned to monetize content that resonates with consumers, given its broad license portfolio, speed-to-market and low upfront product costs, the analyst said.

Funko's acquisitions will help catalyze growth in underpenetrated international markets and category adjacencies such as accessories and apparel, Ng said. 

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With Funko shares trading at 4.6 times 2019 enterprise value/EBITDA versus 11.4 times for its toy peers, Goldman said the valuation is attractive. The firm estimates that Funko will grow at a three-year CAGR of 15 percent in revenue terms and 13 percent in terms of EBITDA.

"While Hasbro, Inc. HAS and Mattel, Inc. MAT's 3Q earnings and disappointing 4Q guidance temper our outlook for the overall toy industry, we believe FNKO is well positioned to realize industry leading growth," Ng said. 

The Price Action

After recording a loss of 41 percent on its debut, Funko shares, though having cut their losses, are still trading below the IPO pricing of $12.

At the time of writing, the shares were up 4.76 percent at $8.59.

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