Funko's Stock Pops 25% After Piper Sandler Upgrade

Toy company Funko Inc FNKO ranks among the worst-performing stocks under Piper Sandler's coverage, but the research firm is now confident in a rebound after chatting with management.

The Funko Analyst: Erinn Murphy upgraded Funko's stock from Neutral to Overweight with a price target lifted from $6 to $12.

The Funko Thesis: Funko's stock is down 51% since the start of 2020 but a chat with the company's president, CFO and head of IR led to the firm switching to a bullish tone. Specifically, the management team expects to show modest growth in the U.S. business in the fourth quarter while gross margin concerns at other competitors aren't an issue at Funko.

Management is expected to release a "good amount" of new content for next year with a focus on recent hit content like "Queen's Gambit," "WandaVision," among others, the analyst wrote in a note.

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More importantly, Piper Sandler's checks point to signs of success with the recent launch of Snapsies at 800 Target TGT stores along with an expansion of board games and accelerated digital efforts.

Specifically, Google Trends point to a "resurgence" in Funko interest with searches up from 4% year-over-year in the second quarter to up 14% in the third quarter and now up 42% quarter-to-date. By contrast, the third quarter of 2019 showed negative search trends.

Bottom line, the research firm is now "cautiously optimistic" on the company given an improving content slate in 2021 while a rebound in theatrical content could warrant incremental upside.

FNKO Price Action: Shares of Funko were trading higher by more than 25% at $10.64.