With Plans to Enter Gaming Market, Is It Time to Buy Funko Stock?

Shares of FNKO hit a two-year high in early August

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Funko Inc (NASDAQ:FNKO) is an American company that produces pop culture collectibles. Earlier in the summer, Funko announced its plans to enter the video game market during its Hall H-Pop! Talk panel. The firm will team up with developer 10:10 Games to produce an AAA Action Platformer next year, which will be spearheaded by video game developer and five-time BAFTA award winner Jon Burton.

Funko stock has managed an 8.2% year-to-date lead, and has added 25.4% in the last nine months. In early August, the stock surged to a fresh two-year high of $27.79. However, FNKO has cooled considerably since then, and yesterday it settled below the formerly supportive 100-day moving average for the first time since early May. 

fnko sept 2

Despite its recent drop, analysts remain incredibly bullish. Of the six on coverage, all but one call it a "strong buy." Plus, the 12-month consensus price target of $29.43 is a 44.6% premium to last night's close. 

Options players have been overwhelmingly optimistic as well. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), eight calls have been picked up for every put during the past 10 weeks. This ratio stands above all other readings from the past year, implying a much healthier-than-usual appetite for long calls of late. 

Moreover, Funko stock remains an intriguing growth play considering its valuation metrics. FNKO trades at a decent price-earnings ratio of 18.21 and a low price-sales ratio of 0.88. The collectibles company has also generated a 79% increase in annual revenues and a 414% increase in annual net income since fiscal 2018. In addition, Funko is expected to end fiscal 2022 with strong growth figures, including 29.7% revenue growth and 35.2% earnings growth. FNKO is also estimated to see an 8.6% increase in revenues and a 10.9% increase in earnings for fiscal 2023, which are solid figures as well. Nonetheless, they do suggest an expected slowdown in growth rate. Still, Funko stock offers investors a good mix of decent fundamentals and speculative growth opportunity.


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