Is Funko A Buy After Sour Guidance? 3 Analysts Weigh In

Shares of Funko Inc FNKO traded as low as $7.14 Thursday but reclaimed the $10 level after the company reported worse-than-expected fourth-quarter EPS and issued weak first-quarter guidance.

By The Numbers: Funko reported quarterly losses of 35 cents per share which missed consensus estimates of a loss of 11 cents, on revenues of $333.04 million, beating the consensus estimate of $318.35 million. Read more...

Analysts at BMO Capital Markets, DA Davidson and BofA Global Securities weighed in on the stock.

The BMO Capital Analyst: Gerrick Johnson maintained a Market Perform rating and left its price target at $10.

Johnson said the disappointing report was reflective of the company’s operational issues, including inventory write-downs and the implementation of a new warehouse management system, which led to a reduction in orders by mass market customers and a decline in revenue.

The analyst said it lowered Funko's 2024 revenue estimate to $996 million from $1.06 billion, but increased the company's adjusted EBITDA estimates to $92 million, as it was implementing cost-saving initiatives to generate $150 to $180 million in annualized cost savings.

The BofA Analyst: Alexander Perry maintained a Neutral rating on the stock but lowered its price target from $12.50 to $11.

Perry said 2023 would be an operational reset year for Funko, as the company announced executive changes, with Steve Nave appointed chief financial officer and chief operating office.

The analyst said its neutral rating and lower EPS estimates reflected the short-term challenges Funko was facing but were partially offset by Nave, who as the former CEO of Walmart.com, should be able to help lead Funko through its transition to its new “Lite Warehouse Management” transition, which was expected to be complete in September of next year.

The DA Davidson Analyst: Linda Bolton Weiser reiterated a Buy rating on the stock and maintained its $20 price target.

Bolton Weiser said the company’s 2023 guidance, which was in line with Street expectations, was the reason for maintaining its EBITDA estimates and $20 price target and said the large EBITDA loss expected for the current quarter created a potential entry point for investors looking to buy into the franchise.

The analyst said the company’s sour guidance created a “hockey stick pattern” of improvement in the remainder of the year.

FNKO Price action: Shares of Funko closed Thursday 7.10% lower at $9.94, according to data from Benzinga Pro. The stock traded between $7.14 and $10.16 during Thursday’s trading session.

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