Piper Jaffray Raises Funko Price Target, Projects 'Strong Commercial Opportunities'

Pop culture collectibles brand Funko Inc FNKO's brand licensing and more prominent retail placement is positioning the toy company for upside, according to Piper Jaffray. 

The Analyst

Piper Jaffray analyst Erinn Murphy reiterated an Overweight rating on Funko and raised the price target from $13 to $18. 

The Thesis

Funko announced a partnership last week with Pokémon; its Pop! Pikachu products are already set in motion for sale at Target Corp TGT stores this summer, Murphy said in a Wednesday note. (See the analyst's track record here.)

Pokémon is the second best-selling video game franchise of all time, and "Fortnite" is the top-grossing iOS game in the Apple Inc. AAPL App Store, as well as Xbox’s No. 1-played game.

The combination of a classic game with a new global phenomenon will likely attract an array of demographics, according to Piper Jaffray. 

"Importantly, the audience for both licenses is broad in nature, with Activision Blizzard, Inc. ATVI noting Fortnite 'is attracting new players of all ages and gender and it is helping gaming become even more mainstream entertainment,'" Murphy said. "We see strong commercial opportunities with limited cannibalization impact and believe these wins showcase FNKO's ability to quickly market/monetize in-demand pop culture." 

Shelf-space expansion at retailer Walmart, Inc. WMT is also a key catalyst, Murphy said. 

Walmart plans to double its shelf space for Funko products this fall. Funko products will be available in entertainment aisle in addition to the toy section. 

The launch of Funko’s cereal FunkO’s, sold at speciality stores like Hot Topic, may lead to cereal brand partnerships over time, Murphy said. 

Price Action

Funko shares were rallying 6.25 percent to $17.34 at the time of publication Thursday. 

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Photo courtesy of Funko.