What Caused Funko Inc (NASDAQ: FNKO) Stock to Fall 14%?

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Funko Inc (NASDAQ: FNKO) Stock fell 14% yesterday for seemingly no reason. The company made no announcement, no news came out about the company, nothing. So what is making the stock fall so drastically? You know Funko Inc (NASDAQ: FNKO), the purveyors of pop-culture vinyl dolls in the form of their FUNKO POP! line.

These figurines come in every variety you can imagine from all realms of pop culture. The company considers themselves one of the ultimate purveyors of pop culture and I am inclined to agree. If you are a fan of any movies, TV, video games, or music there is probably a POP! out there for you.

Reasons for Funko Inc (NASDAQ:FNKO) Drop

Some point out the stock is up over 350% this year, and that is reason enough for the stock to drop. Sure, I can buy that... to an extent. We are talking about 14% in a matter of minutes with no discernible catalyst. It doesn't seem like anyone can nail down a cause and it is making analysts grasp at strange theories such as the announcement for a new Call of Duty game. I shouldn't have to point out that makes no sense.

What does make sense, however, is the overall pressure the toy market has been feeling along with drops in the major indices and retailer stocks. Most of Funko Inc (NASDAQ: FNKO) peers, such as Hasbro, Inc. (NASDAQ: HAS) have seen declining sales this year. The end of retailer Toys R' Us didn't help matters either. Despite this Funko Inc (NASDAQ: FNKO) sales have been steadily increasing, up 32% in the first half of the year, that doesn't appear to be slowing either as Funko Inc (NASDAQ: FNKO) adds more licenses to their ranks, such the absurdly popular Fortnite game, moving towards the holiday season. The one glaring problem Funko Inc (NASDAQ: FNKO) has is its free cash flow, of which there is almost none. This can probably be chalked up to it's increased focus on obtaining new licenses. 

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In fact no single license accounts for more than 6% of Funko Inc (NASDAQ: FNKO) profit generated. It's a portfolio of sorts, and Funko Inc (NASDAQ: FNKO) stays diversified in this respect. CEO Brian Mariotti says it best himself, "Our platform allows us to continually put out new products based on the steady stream of content.

Think of it as an indexed fund of popular culture and entertainment. We don't have to be the one coming up with the hit ideas, and although we don't bet heavily on just one or two, we believe that based on our expertise, we can better predict what hot properties will be.", they keep their fingers on the pulse of the pop culture market. 

Future Outlook

From a technical standpoint, there is still a potential downside in the short term. 21 USD might not hold and a retracement to 19 USD could be in the cards as the next major support level. For the next few days, volatility will probably be up as the stock catches the attention of traders on both sides so there are potential opportunities there. More cautious long-term investors may want to watch for the stock to stabilize before finding a position.

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Long term the outlook is good, especially if  Funko Inc (NASDAQ: FNKO) can improve its free cash flow in the coming months and years. Despite the closure of Toys R Us,  Funko Inc (NASDAQ: FNKO) has no shortage of outlets to turn to. Their products can be found primarily at Walmart Inc (NYSE: WMT)Target Corporation (NYSE: TGT), and Amazon.com, Inc. (NASDAQ: AMZN) just to name a few.

Comments (2)

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  • John R
  • ,  Contributor
  • 14 September 2018, 10:09 am

21.50 would be a decent place to dip ur toe in... could be a double bottom

   0   Reply (0)   Follow(437)  

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    • DoubleD
    • ,  Contributor
    • 14 September 2018, 10:09 am

    Everything is great. The stock just got ahead of itself. Adjusting now

       0   Reply (0)   Follow(437)  

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