Shares of Funko (FNKO - Free Report) were up more than 6% through afternoon trading hours Monday, extending a solid streak for the trendy toymaker which has now seen the young stock add about 20% in just three days.
Based in Everett, Washington, Funko makes pop culture-tinged toys and collectibles. It is best known for its Pop! vinyl figures, a line of bobblehead-sized toys featuring original and licensed characters. Pop! figures retail for about $10 to $20 each and are available online, or in stores like Target (TGT - Free Report) , GameStop (GME - Free Report) , and Barnes & Noble .
Fans of the toys will recognize Funko’s own mascot, Freddy Funko, but the company has skyrocketed to fame on the back of its collaborations with franchises such as Marvel, DC Comics, Doctor Who, Star Wars, and more.
Funko was founded in 1998 by Mike Becker. However, it was not until Becker sold the company in 2005 that Funko began to drastically expand its licensed product lines. The company was sold to private-equity firms in 2013 and 2015 and has since continued its rapid expansion.
Funko went public in November 2017 and faced a historically bad first day of trading, dropping about 41% from its opening price. IPO research firm Renaissance Capital reported at the time that Funko’s debut performance marked “the worst first-day return for an IPO in 17 years.”
Shares of the toy company closed at $7.07 on their first day, down from an IPO price of $12. Plus, that initial price was already down from an expected range of $14 to $16 per share. Funko had intended to generate as much as $245 million during its debut, but the company would end up raising just about $125 million.
Heading into the IPO, investors were concerned about Funko’s mounting debt, which had snowballed due to $98 million in dividends paid to private-equity owners. There was also a Bloomberg op-ed around the time of the event which criticized Funko’s use of “adjusted Ebitda” in its prospectus and argued the company’s earnings growth was much more sluggish than it was letting on.
A Strong Recovery
Funko shares touched an intraday high of $19.86 on Monday morning, setting a new all-time peak for the fledgling stock and representing a nearly 181% recovery from its opening day close. Since the disastrous IPO, investors have had a hard time denying the popularity of Funko’s core products, and the company has continued to offer new brands and characters which collectors love.
For instance, Funko announced last week that it would soon debut a line of Pop! figures featuring Marvel: Avengers Infinity War characters. And just today, Comicbook.com reported that the company’s new Pokemon Pickachu Pop! toys—originally a Target exclusive—sold out in just five minutes after being released online.
But the most exciting Funko product release is its upcoming collection of official Fortnite toys. Funko managed to secure an exclusive deal with Fornite maker Epic Games, allowing it to roll out the first-ever toys and collectibles based on the popular game.
Fortnite is best known for its Fortnite Battle Royale game mode, which sees up to 100 online players fighting to be the last person standing in an increasingly-smaller playable space. This mode operates on a freemium model and currently boasts about 125 million worldwide users.
Upcoming Earnings Report
Funko is set to release its latest quarterly earnings report after the market closes on Thursday. According to our latest Zacks Consensus Estimates, analysts expect the company to post revenue of $121.7 million and earnings of $0.02 per share. This consensus EPS projection has trended upward recently, adding one penny in the past week.
Looking at the full fiscal year, current estimates are calling for Funko to see revenue of $614.8 million and earnings of $0.65 per share. These results would represent year-over-year growth rates of 19% and 76%, respectively.
Funko has seen two positive revisions to its full-year EPS estimates within the past 30 days. This revision activity has earned the stock a Zacks Rank #2 (Buy). The company also sports a projected long-term annual EPS growth rate of 25%.
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