How to Buy Funko Inc. (NASDAQ: FNKO) Stock

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Contributor, Benzinga
January 6, 2023
$6.01
-0.02[-0.33%]
Last update: 4:00PM (Delayed 15-Minutes)
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Open5.990Close6.010Vol / Avg.529.927K / 463.114KMkt Cap318.947MDay Range5.800 - 6.12052 Wk Range5.270 - 13.420

Funko Inc. (NASDAQ: FNKO) is a stock that you might not expect to pop up on your radar when searching for opportunities. The toy company has earned a reputation in pop culture for its vinyl figures and bobbleheads.  

Recently, its stock has taken a beating from investors. The company missed estimates in its third-quarter earnings and slashed its outlook for the fiscal year. This resulted in its shares plummeting 47% in a single day. 

The stock has also been weighed down by the market sell-off driven by the Fed's aggressive rate hikes. Given its current price level, is Funko stock a bargain or a value trap for investors?  

How to Buy Funko Inc. (NASDAQ: FNKO) Stock

Purchasing Funko stock is a simple and quick process. You need to create an account with a broker to be able to buy or sell Funko stock.

Here's a step-by-step guide to getting started with your Funko stock ownership.

Step 1: Pick a brokerage.

You can buy Funko shares through a broker. Choosing the best brokerage is a matter of choice. Each brokerage provides services tailored to suit a class of investors. The broker that suits your investing need may not meet the needs of another investor.

However, it is advisable to choose a brokerage that reflects your investing style. Regardless, factors that should be top of mind when picking a brokerage are security, license, U.S. Securities and Exchange Commission (SEC) registration, fees and commissions, ease of trading and withdrawing funds and minimum deposits

Step 2: Decide how many shares you want.

Decide how many Funko shares you want to purchase. This decision may ultimately depend on certain factors such as capital, investment strategy, risk appetite and outlook of the company based on analyst recommendations or fundamental analysis. Just like choosing a brokerage, there is no cut-and-dried method to deciding how many Funko shares you want to purchase. 

Step 3: Choose your order type.

An order type is an instruction to a broker to buy or sell a security on an investor's behalf. When you start to invest in Funko shares online, you place orders with your broker. You have a number of different order types to choose from. Your choice of order type depends on your strategy, knowledge and expertise. The different types of orders your broker may offer are market, limit, stop, stop-limit or stop-loss orders. 

Step 4: Execute your trade. 

After you have submitted your order, your broker executes your trade, filling the buy or sell order. Timing is usually a significant factor to consider because orders are not always fulfilled immediately. The price investors ultimately pay for the stock will depend on the time and execution strategy adopted.

Since stock prices are constantly fluctuating and your trades route through a broker before being submitted to the market, you may not buy Funko stock at the exact price when you placed the order.

Where to Buy Funko

Funko shares are traded on the Nasdaq exchange and can be bought through any registered broker. 

Funko Stock History and Value

funko stock price

Shares of Funko have fallen 47.3% year-to-date. Using several fundamental metrics, Funko stock is likely overvalued. Though the company's revenues increased by 36% quarter-over-quarter and 42% year-on-year, the company has a high debt ratio with earnings plunging by 35% on an annualized basis. 

The toy maker's debt-to-equity ratio (1.78) is higher than the sector average of 0.14, while its return-on-equity at 12.56% is moderately low. The company is also operating on a negative cash flow of $56.11 million and missed analysts' estimates in the third quarter by a wide margin. 

FNKO: What Analysts Are Saying

Analysts' recommendations provide insight into how institutional investors view a stock. Retail inventors usually use them as a guide to know what financial experts think. Here's what analysts say about Funko stock. 

Bank of America Bear Case

Analysts at Bank of America downgraded shares of Funko from a "buy" rating to a "neutral" rating and lowered their price target for the company from $35.00 to $9.00. The reason for the bear case comes from the company's disappointing third-quarter earnings and poor guidance for the coming fiscal year. 

Funko's earnings dropped for the second quarter in a row, with the toy maker slashing its full-year forecast. Analysts also cited rising living costs that have put pressure on retail  spending. As a result, consumers could be spending less on discretionary products. Given this, the outlook for Funko stock may look grim. 

Goldman Sachs: Neutral Rating

Despite its earnings miss and weak forecast, analysts at Goldman Sachs have maintained their neutral rating on Funko stock, though their price target was adjusted from $25.50 to $22. Its thesis may be based on the premise that the company's profit is expected to grow by 18% over the next couple of years. 

Pros and Cons of FNKO

Pros Cons
Trading at a bargain price after losing close to 50% so far this year.Operating on negative cash flow.
Earnings are forecast to grow 30.29% per year.Stock is highly volatile. Lost over 50% in a single day due to missed earnings.
Earnings have grown 41.6% per year over the past 5 years.Does not pay dividends.
Has a high level of non-cash earnings as shown by its debt-to-equity ratio.

Is FNKO a Buy, Sell or Hold?

Funko stock is a sell based on fundamental metrics. The company has negative cash flow, with a debt-to-equity ratio that is higher than the sector average. This metric suggests that Funko funds its operations and growth with high leverage.

Given that the current macroeconomic outlook is characterized by rising interest rates, larger debt means that the company could end up paying more interest for its debt.

Also, earnings have been shrinking in the past year, while its current return on equity of 12.56% is considerably low. This level suggests that Funko is generating low income from its equity for shareholders.

Finally, given the fiscal outlook that the company has slashed based on weak consumer demand, and mounting bear cases against the stock from Wall Street analysts, analysts identify more reasons to sell Funko than hold or buy.

Frequently Asked Questions

Q

When did Funko become a publicly traded company?

A

Funko became a publicly traded company on Nov. 2, 2017.

Q

Can I purchase Funko through a direct stock purchase plan?

A

Funko does not offer a direct stock purchase plan to non-employees.