On Wednesday, B.Riley initiated coverage on Funko (NASDAQ:FNKO), a pop culture consumer products company, with a Buy rating and a 12-month price target of $10.00 per share. The firm outlined its perspective on the company's future, citing several strategic and operational improvements that could potentially enhance profitability in the upcoming years.
According to B.Riley, despite Funko's less-than-stellar financial performance in 2022 and 2023, and the subsequent lackluster performance of its shares, the firm is optimistic about the company's prospects. The analyst suggests that the changes made by the company have laid a solid foundation for the new senior management team to lead the company toward higher profitability starting in 2024.
A significant development highlighted by B.Riley is the introduction of the Pop! Yourself product on Funko's website. This feature is seen as a potential "game changer" that could expand the company's customer base and significantly improve its direct-to-consumer sales mix as well as its adjusted EBITDA margins.
The firm anticipates that as Funko's cash flow increases and its net leverage ratio decreases to more favorable levels by 2025, the valuation multiple will likely respond positively.
InvestingPro Insights
While B.Riley has initiated coverage on Funko (NASDAQ:FNKO) with a positive outlook, it's important to consider the company's current financial health as reported by InvestingPro. The real-time data reveals a market capitalization of $302.5 million and a concerning negative P/E ratio of -1.79, reflecting the analysts' concerns about profitability. The adjusted P/E ratio for the last twelve months as of Q4 2023 further underscores this, at -2.13. Additionally, the revenue decline of -17.13% over the last twelve months indicates challenges in the company's sales performance.
InvestingPro Tips suggest that Funko operates with a significant debt burden and may struggle to make interest payments, which could be critical factors for potential investors to consider. Moreover, the stock has experienced a notable decline over the last three months, with the price falling by -20.64%. Analysts do not anticipate Funko will be profitable this year, and the company does not pay dividends, which might deter income-focused investors.
For readers interested in a deeper analysis, there are additional InvestingPro Tips available that could provide further insights into Funko's financial situation and future prospects. To explore these tips and make more informed investment decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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