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Funko Shares Plunge To All-Time Low After BMO Downgrade

Funko Shares Plunge To All-Time Low After BMO Downgrade
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Nearly two weeks after Funko Inc (NASDAQ: FNKO) released its first quarterly report as a public company, BMO Capital Markets downgraded the stock, sending shares scuttling to their lowest levels since the listing.

This is in contrast to the views of Goldman Sachs analyst Michael Ng, who said in late November that he sees 100-percent upside for Funko.

The Analyst

BMO Capital Markets analyst Gerrick Johnson downgraded shares of the manufacturer of licensed pop culture toys from Outperform to Market Perform and reduced the price target from $10 to $7.50.

The Thesis

Recent channel checks revealed a buildup of Funko's inventory at the retail level, particularly of its flagship Pop! Line, as well as an increase in markdowns, Johnson said in a Tuesday note. (See Johnson's track record here.) 

Since the Q3 report, Funko's performance has deteriorated relative to expectations, Johnson said. And the overall toy and collectibles industries have performed below John's expectations this holiday season. 

"We think U.S. retail sales of toys (and pop culture collectibles) are running down low-to-mid-single digits percent for the season," Johnson said.

The decline of the value in Pop! Collectibles in the secondary market since mid-November is a warning sign for the health of the market, the analyst said. 

BMO lowered the multiples used for its valuation of Funko and reduced its 2019 EBITDA estimate from $121 million to $109 million. 

The Price Action

Since ending the debut session on Nov. 2 at $7.07, a 41-percent discount to the $12 offer price, Funko shares have languished, losing 3.25 percent.

At the time of publication, Funko was trading down 8.92 percent at $6.50. 

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Latest Ratings for FNKO

Nov 2018BMO CapitalMaintainsMarket PerformMarket Perform
Aug 2018BMO CapitalMaintainsMarket PerformMarket Perform
Aug 2018JP MorganMaintainsOverweightOverweight

View More Analyst Ratings for FNKO
View the Latest Analyst Ratings

Posted-In: BMO Capital Markets Gerrick JohnsonAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga


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