B.Riley increased its price target for Funko (NASDAQ: NASDAQ:FNKO) shares to $15.00, up from the previous $13.00, while maintaining a Buy rating on the stock.
The firm's decision follows a two-day non-deal roadshow (NDR) with Funko's management, which took place earlier this week. The meetings in Montreal and Toronto featured Funko's CFO Yves LePendeven and Director of Investor Relations Rob Jaffe.
During the roadshow, B.Riley gained confidence in Funko's potential for accelerated sales growth and AEBITDA margin expansion anticipated for 2025 and beyond.
The optimism stems from several strategic initiatives outlined by Funko's management. The company plans to expand its customer reach with a more targeted distribution strategy and expects a boost from the projected recovery in the Hollywood film and TV slate, which is likely to drive content-led product development.
Furthermore, Funko's recent successes with the direct-to-consumer (DTC) channel in the U.S. are expected to be replicated across various international regions. The expansion strategy is coupled with the company's efforts to execute tuck-in acquisitions, which aim to broaden its product lineup and address a growing total addressable market (TAM).
The analyst from B.Riley believes that Funko's shares are currently undervalued when considering the projected AEBITDA growth rates in comparison to its peers.
In other recent news, Funko has been experiencing steady growth in its earnings and revenue, as highlighted in its Q2 earnings call.
The company reported a 3% increase in net sales, reaching $248 million, and a robust adjusted EBITDA of $28 million, surpassing expectations. In addition, Funko has maintained its full-year guidance, expecting net sales to range between $1.047 billion and $1.103 billion and adjusted EBITDA to hit between $65 million and $85 million.
Funko has also recently announced a partnership with the National Football League (NFL), allowing the company to offer custom Pop! Yourself figures featuring t-shirts and hoodies with logos from any of the 32 NFL teams.
The collaboration is expected to attract additional consumers to Funko's diverse product range and significantly contribute to the company's growth. B.Riley has reaffirmed its Buy rating on Funko shares following the announcement of this deal.
InvestingPro Insights
B.Riley's recent upgrade of Funko's (NASDAQ:FNKO) price target aligns with some of the positive market dynamics observed, despite concerns from analysts regarding the company's profitability. According to InvestingPro data, Funko's market capitalization stands at $552.88M, with a notable six-month price total return of 61.16%, reflecting a significant uptick in investor confidence. This upward trajectory is further supported by a year-to-date price total return of 32.6%, indicating robust performance in the current fiscal year.
However, the company's financial health does present some challenges. The P/E ratio, as of the last twelve months leading to Q2 2024, is negative at -9.78, which may raise questions about valuation among investors. Additionally, Funko has experienced a revenue decline of -10.33% over the same period, suggesting that while the stock price has risen, the underlying business performance needs to be monitored closely.
InvestingPro Tips highlight that Funko has a high shareholder yield and has seen a large price uptick over the last six months, which could be appealing to momentum investors. On the flip side, analysts have revised their earnings downwards for the upcoming period, and the company is not expected to be profitable this year. It's also worth noting that Funko does not pay a dividend, which might be a consideration for income-focused investors. For those interested in a deeper dive into Funko's financials, InvestingPro offers additional tips on its platform.
Overall, while the market sentiment appears positive in the short term, potential investors should weigh the company's growth prospects against the backdrop of its current financial metrics and analyst expectations. For a comprehensive understanding of Funko's financial health and future outlook, investors can find more InvestingPro Tips at https://www.investing.com/pro/FNKO.
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