FNKO - Funko stock falls over 50% after 'head-scratching Q3 results' (update)

A big miss on earnings and a cautious full-year forecast battered Funko ( NASDAQ: FNKO ) stock on Friday.

The figurine manufacturer posted a surprisingly large contraction in net income in the quarter, falling 39.3% from 2021 to $11.1M, leading to a wide miss on EPS estimates. While revenue narrowly beat estimates, forecasts for the holiday shopping season showed little room for optimism.

Full-year net sales forecasts of $1.29B to $1.33B suggest little to no sequential acceleration and it suggests disappointment in light of the $1.33B analyst consensus. Gross margins are expected to decline amid inventory issues and persistent inflation impacts. As such adjusted EPS guidance was forecast for a range of $0.85 to $0.95, less than half the consensus of $1.91 even at the upper limit.

Truist analyst Michael A. Swartz took his rating on Funko ( FNKO ) to “Hold” from “Buy”  after the results, calling the results “head-scratching”. Additionally, he cut his price target in half to $13 from a prior $26.

“In addition to the 3Q earnings miss, FNKO provided a downright concerning '22 earnings update and indicated that materially higher investment spend (as well as elevated inventory) will impair profitability well into '23,” Swartz noted. “With little to no earnings visibility, at current, and what we will believe will be a lingering credibility issue, we can no longer recommend shares to investors.”

He further lamented management’s “long streak of erratic quarters/guidance” that have clouded visibility on the company’s trajectory. Swartz expects credibility problems to persist for the “foreseeable future” given the magnitude of the miss on Thursday evening.

Shares of the Washington-based company fell over 53% shortly after the market open, a record one-day decline for the stock.

Read the earnings call transcript .

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