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Funko Shares Plunge To New Lows — But Why?

September 12, 2018 3:32 pm
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Funko Shares Plunge To New Lows — But Why?

The imminent launch of "Call of Duty: Black Ops 4" brings another contender to the exceedingly popular battle royale gaming space. 

In light of the recent beta release, "Call of Duty" creator Activision Blizzard, Inc. (NASDAQ:ATVI) has received abundant favorable reviews and strong game feedback, putting a damper on the buzz surrounding "Fortnite" and "PlayerUnknown’s BattleGrounds," or PUBG.

What Happened

Funko Inc. (NASDAQ:FNKO), which produces popular action figures, recently unveiled a product line based on characters from "Fortnite" to be sold this holiday season. Following the release of Activision Blizzard’s beta, Funko stock plunged 18 percent. As of Wednesday afternoon, shares were down 4.35 percent at $24.41. Since then, industry experts have scrambled to determine the impetus.

Why It’s Important

One theory on the share drop surrounds the reverberation from the much anticipated "Call of Duty" game.

Given the extraordinary success of battle royale games as of late, it would make sense that young games like "Fortnite" and PUBG would struggle when faced against a franchise juggernaut with the tenacity of "Black Ops."

Another theory was pitched by The Motley Fool immediately following the drop. The speculation referred to Funko data that indicated shares have risen over 300 percent since the company's initial public offering. The question lies in whether Funko is worth the price surge. 

The company lacked free cash flow in 2017 and has earned a mere $800,000 in the last year, according to the Motley Fool. 

Despite profitable quarters in 2018, The Motley Fool considers the overall stock valuation to be ambitious.

What’s Next

The holiday release of "Fornite" products as well as the success of "Call of Duty" in October will fill in some blanks. Will "Call of Duty" reign as the most popular battle royale game, making "Fortnite" and related merchandise obsolete?

Related Links:

2 Giants Join Forces: Funko Announces Partnership With Epic Games

Stifel: Funko's Q1 Impresses Despite Toys R Us Liquidation


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