Funko storms the toy industry

You have probably already seen (and possibly even possessed) one of society's Pop! Vinyl figures for Marvel superheroes, comprising Captain America and Thor. Funko also plays Star Wars characters such as R2-D2 and C-3PO, Eleven's From Netflix (NFLX) Stranger Things, and even real athletes from the NFL and the NBA. They are popular with children as well as serious collectors.
Fans love Funko (FNKO) toys. And investors too.

The company recorded sales growth of nearly 25% in the third quarter of 2018. In November, it also raised its earnings and earnings outlook for the year.

Funko will announce its results for the fourth quarter on February 28th. Analysts expect sales will have risen nearly 20% from a year ago and earnings per share will more than double.

Funko's stock is up more than 40% this year. But stocks have been extremely volatile since the introduction of Funko at a price of $ 12 in November 2017.

The stock plunged more than 40% on the first day of trading to about $ 7, because of fears that the company is a fad. But it rebounded, exceeding $ 30 last September. Shares traded around $ 19 on Tuesdays.

It seems that Funko is doing well. The company was founded in 1998 with the aim of "focusing on state-of-the-art toys and the theme of nostalgia". There is clearly a market for that. Wall Street expects sales will reach nearly $ 740 million in 2019, up about 15% from last year.

And now, Funko hopes to go further.

Erinn Murphy, an analyst at Piper Jaffray, thinks the new Pokémon toys will benefit from the release of the movie "Pokémon Detective Pikachu" in May and the animation "Mewtwo Strikes Back: Evolution", which will be released in Japan in July. .

Murphy wrote in an article that Funko had already been heavily involved on Instragram for articles about his toy for the Bulbasaur character. And she estimates that Pokémon toys could eventually bring in $ 50 million in annual sales at Funko, a level comparable to Star Wars numbers.

Funko has also started making t-shirts, hoodies and other clothing and his studio produces short cartoons.

The hope is to sell even more Funko products to children and young adults obsessed with pop culture.

Funko seeks to diversify like other toy manufacturers

With the studio, Funko also takes a page of Hasbro (AT) and Lego, both of whom have enjoyed success with animated films and television shows.
Mattel (CARPET) is also looking to get into entertainment after signing an agreement with Warner Bros. for the production of Barbie and Hot Wheels films. (Warner Bros., like CNN, is part of AT & T (T)owned by WarnerMedia.)

Funko also announced last week its intention to buy the board game maker Forrest-Pruzan Creative LLC, a company that has developed pop culture games centered on the villains of Disney, Harry Potter, and even the deceased artist and television host Bob Ross, famous for his painting. Happy little trees. "

Funko Chairman Andrew Perlmutter said in a press release that the acquisition fits with the rest of the company's strategy.

"The games category is another way of transmitting pop culture to our ever-growing fans," he added.

The toy retail sector, however, is changing, which could be a problem for Funko. Despite a solid holiday a few weeks ago, Mattel surprised Wall Street on Friday by announcing mediocre results for 2019, in part due to the bankruptcy of Toys "R" Us.

Again. Funko has not been as exposed to Toys "R" Us as its biggest competitors. Funko said in its latest annual report that Toys "R" Us sales accounted for only 3% of overall business, compared to nearly 10% for Mattel and Hasbro.

Instead, Funko relies more on specialized retailers such as GameStop (GME) and Hot Topic, mass retailers like Walmart (WMT) and Target (TGT), and e-commerce sites – especially Amazon (AMZN).

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