Funko's 'Growth On Pace' Despite Weak Price Action

In contrast to its poor stock price action of late, Jefferies expects imminent sales momentum and growth from Funko Inc. FNKO in the fourth quarter and 2019. 

The Analyst

Jefferies analyst Stephanie Wissink reiterated a Buy rating on Funko with a $23 price target.

The Thesis

The retail location at Funko headquarters in Everett, Washington has been exceeding sales and improving external relationships, Wissink said in a Wednesday note. (See her track record here.) 

“Buyers are able to visualize more robust assortments, merch strategies and digital and marketing tie-ins.”

The toymaker views the retail store model as one that could be broadened as a hub for passionate fans that touches on merchandise, licensed content, news, influence and "derivative new-form commercable content," the analyst said. 

Jefferies is not modeling secondary revenue streams, but they could become measurable as soon as 2019 or 2020, Wissink said. 

The recent sell-off in Funko should facilitate a strong short- and long-term buying opportunity, she said.

The company faces little to no competition at scale, and there is no evidence of slowing demand for its core POP figures, which account for 60 percent of Funko's sales mix, the analyst said. 

“The content slate for 2019 looks strong and company continues to smartly tap the vault of properties that play to core consumer interests.”

Price Action

Funko shares were down 1.39 percent at $15.24 at the time of publication Wednesday.

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