What Happened?
Shares of pop culture collectibles manufacturer Funko (NASDAQ:FNKO) fell 15.9% in the afternoon session after the company reported weak fourth quarter results: its full-year revenue and EBITDA guidance missed. Tariffs on Chinese imports and continued softness in U.S. sales remained headwinds. However, Funko managed to outperform analysts' estimates on both revenue and EBITDA during the quarter, driven by strength in its direct-to-consumer and EMEA businesses. Still, despite those bright spots, the overall picture leaned weak, and that's likely what weighed on sentiment.
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What The Market Is Telling Us
Funko’s shares are very volatile and have had 27 moves greater than 5% over the last year. But moves this big are rare even for Funko and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 12 months ago when the stock gained 17.5% on the news that the company reported strong fourth-quarter results that outperformed analysts' revenue and EPS expectations. While revenue guidance for next quarter fell short of Wall Street's estimates, full-year adjusted EBITDA guidance was nicely ahead.
Notably, the bottom line benefited from key initiatives implemented in the fiscal year, including 1.) Elimination of unprofitable product lines and SKUs. 2.) Workforce reductions 3.) Aggressive reductions in inventory levels.
While the market cheered the improved profitability, management noted that some of these recent moves might impact top line growth in the year, as full-year sales growth is expected to be flat. The company also highlighted other growth headwinds, including "a softer content schedule primarily due to the recent Hollywood strikes" and "uncertainty around shipping costs primarily due to current hostilities in the Red Sea."
In addition, the Funko announced a leadership update with Steve Nave, Chief Financial Officer (CFO) and Chief Operating Officer, expected to resign effective March 15, 2024. Yves LePendeven, the company's Deputy CFO, served as Acting CFO as of the same date.
Lastly, the company continued its search for a new CEO, with Michael Lunsford remaining as the Interim Chief Executive Officer until the search was complete. Overall, this was a decent quarter for Funko despite the challenges faced during the period.
Funko is down 30.9% since the beginning of the year, and at $9.40 per share, it is trading 35.2% below its 52-week high of $14.50 from January 2025. Investors who bought $1,000 worth of Funko’s shares 5 years ago would now be looking at an investment worth $1,492.
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