FNKO · Funko
Conviction · Medium · more likely to lead the S&P 500 over the next three months, by a modest margin
Wrong if: a daily close below $6.40
Note written ·
How this view changed
- · Rating raised from Low to Medium. Results, 5 November 2026: Funko's Q3 2026 gross margin of 45.2% and adjusted EBITDA of $32.1M beat guidance of 43–44% and $25–30M, with full-year guidance reiterated.
Price against the kill line
8.0% clear of its kill line on the 13 November 2026 close.
How to read this
The red mark is the price level of the published kill line: a close through it (a weekly close, on a weekly line) would prove the research note wrong on price. The dot is where the stock closed on 13 November 2026; a dot left of the mark has closed through its line.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close below $6.40, on record since 11 November 2026. The shares are up 13.5% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close below $6.40, under the 28 October 2026 close of $6.59 and giving back the post-report gain. A cut to the $100–110 million 2026 adjusted EBITDA outlook would also break the case.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Consumer Discretionary
Quarter to 30 September 2026, filed 5 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 258
- Revenue, change on a year (%)
- +3.0
- Gross margin (%)
- 45.2
- Operating margin (%)
- 5.8
- Free cash flow, four quarters ($M)
- 48.6
- Net cash, cash less debt ($M)
- −30.0
- Price to earnings (×)
- 87.1
- Enterprise value to sales (×)
- 0.5
All filed numbers
What Funko reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 258 | +3.0 | 45.2 | 5.8 |
| first filed | 208 | +7.4 | 56.6 | 10.7 |
| first filed | 201 | +5.3 | 44.2 | −4.8 |
| first filed | 273 | −7.0 | 40.9 | 2.2 |
| first filed | 251 | −14.3 | 40.2 | 2.6 |
| first filed | 194 | −21.9 | 32.1 | −18.0 |
| Pre-tax income ($M) | 8.8 |
| Net income ($M) four quarters: 4.6 | 7.5 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +6.2 |
| Operating cash flow ($M) | 82.3 |
| Capital spending ($M) | 33.7 |
| Free cash flow ($M) | 48.6 |
| Cash and short-term investments ($M) | 41.6 |
| Debt ($M) long-term debt | 71.6 |
| Net cash, cash less debt ($M) | −30.0 |
| Deferred revenue ($M) −27.5% on a year | 16.1 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 132 |
| Inventory ($M) | 91.6 |
| Shareholders' equity ($M) | 198 |
| Market value ($M) | 402 |
| Enterprise value, market value plus net debt ($M) | 432 |
| Enterprise value to sales (×) | 0.5 |
| Enterprise value to operating income (×) | 12.9 |
| Price to earnings (×) | 87.1 |
| Price to book value (×) | 2.0 |
| Free-cash-flow yield (%) | 12.1 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 12.5% of shares outstanding sold short, 8.3 days of average trading to cover, −5.0% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $500K | $1.4M |
| 12 monthsfrom | $500K | $1.9M |
The thesis
Funko's third-quarter report on 5 November 2026 answered the open question: gross margin held above guidance without the tariff one-off, and the shares sit at a 52-week high of $7.24 (close of 10 November 2026). The next test is the holiday quarter, because full-year guidance was only reiterated and Loungefly, the bags and accessories line, is shrinking.
Funko reported third-quarter net sales of $258.3 million, up 3.0%, with gross margin of 45.2% against guidance of 43–44% and 40.2% a year earlier, according to its 8-K. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation, adjusted for one-offs) was $32.1 million against guidance of $25–30 million. Adjusted earnings per share were $0.16 versus a $0.10 estimate, per Benzinga.
The company kept 2026 guidance unchanged: net sales flat to up 3%, gross margin 46–47% and adjusted EBITDA $100–110 million. That range still includes the $25.4 million one-time tariff benefit booked in the second quarter. Benzinga's headline put the consensus sales estimate at $936.9 million, above the top of Funko's $908.2–935.5 million range.
The story is well known: the turnaround numbers have been public since the 6 August 2026 second-quarter report, the third quarter confirmed them on 5 November 2026, and the shares closed at $7.24 on 10 November 2026 after trading at $6.59 on 28 October 2026.
Bullish and bearish views on Funko, Inc.
The bull case on Funko, Inc. (FNKO), in brief: margin beat guidance without the tariff credit. The bear case: full-year guidance was not raised after a beat.
Bull case
- Margin beat guidance without the tariff credit. Third-quarter gross margin was 45.2% versus guidance of 43–44%, and adjusted EBITDA of $32.1 million topped the $25–30 million range (Funko 8-K, 5 November 2026). Funko credited lower freight costs and favourable reserve adjustments, according to its third-quarter presentation.
- Core Collectibles is still growing. Core Collectibles sales rose 4.8% to $210.1 million in the third quarter, and the "Other" category rose 37.0% to $8.0 million (Funko 8-K, 5 November 2026).
- Debt keeps falling. Total debt was $195.9 million at 30 September 2026, from $201.1 million at 30 June 2026 and $225.3 million at 31 December 2025. Cash was $41.6 million (Funko 8-K).
- Inventory is lower than a year ago. Inventory was $91.6 million at 30 September 2026 versus $99.8 million at 30 September 2025, ahead of the holiday quarter.
- Net income turned up. Third-quarter net income was $7.5 million ($0.13 per diluted share) versus $0.9 million ($0.02) a year earlier.
Bear case
- Full-year guidance was not raised after a beat. Funko reiterated flat-to-up-3% sales and $100–110 million adjusted EBITDA on 5 November 2026. Benzinga's headline shows the consensus sales estimate of $936.9 million above the top of the guided range.
- Loungefly is declining faster. Loungefly sales fell 9.8% to $40.3 million in the third quarter, after a 1.7% decline in the second (Funko 8-K). Management is cutting the number of Loungefly products to concentrate on stronger sellers.
- Profit guidance still contains a one-off. The $25.4 million tariff benefit from the second quarter is included in the 2026 gross margin and adjusted EBITDA guidance (Funko 8-K, 5 November 2026).
- The shares are at the analyst consensus. The shares closed at $7.24 on 10 November 2026; the average analyst target was $7.25 as of 16 October 2026 (StockAnalysis). Goldman Sachs adjusted its target on 10 November 2026 (headline only; the figure is not confirmed here).
- Mattel takeover talk has gone quiet. The Wall Street Journal reported Authentic Brands interest in Mattel on 1 October 2026, and no bid has been confirmed since.
Price setup
The shares closed at $7.24 on 10 November 2026, equal to the 52-week high, on adjusted daily closes. They are up 21.1% over three months, and the 14-day relative strength index (RSI) is 55.7, which is not stretched. The close on 28 October 2026 was $6.59.
The earnings date is behind the shares, so no report sits inside the next 30 days. The company's next scheduled disclosure is the fourth-quarter report, expected after the window. The $7.24 high and the $6.59 pre-report close mark the near-term range.
Crowding evidence is limited. The RSI is mid-range, and no SEC Form 4 insider-sale or share-issuance filing appears in company news for the period. Analyst coverage is thin, with Seaport Global at Buy with an $8 target (24 August 2026), D.A. Davidson at Buy with an $8 target (7 August 2026) and Goldman Sachs at Hold with a $6.75 target (10 August 2026), per StockAnalysis.
Catalysts ahead
- 27 November 2026: Black Friday, start of peak holiday toy and collectibles shopping. Retailer and sell-through commentary is the nearest read on the holiday quarter, which carries most of Funko's seasonal orders.
- ~26 February 2027 (est.): Fourth-quarter and full-year 2026 results (date not announced by Funko). Settles whether the $100–110M adjusted EBITDA outlook is met and whether the margin gain holds.
What would change the view
A daily close below $6.40, under the 28 October 2026 close of $6.59 and giving back the post-report gain. A cut to the $100–110 million 2026 adjusted EBITDA outlook would also break the case.
The risks this note tracks, each with what would confirm it:
- Holiday-quarter margin falls short of the 46–47% full-year gross margin guidance once the one-time tariff benefit is excluded. Confirmed by: fourth-quarter gross margin or a full-year adjusted EBITDA result below $100M at the fourth-quarter report.
- Loungefly's decline deepens and drags on total sales. Confirmed by: Loungefly sales falling more than the 9.8% of the third quarter, or net sales below the flat-to-up-3% range.
- Shares already sit near the analyst consensus target, leaving little room if momentum slows. Confirmed by: analyst targets clustering near $7.25 and a daily close back below $6.59.
- Debt reduction stalls and keeps a discount on the shares. Confirmed by: total debt above $201.1M in a future quarterly report.
What it trades with
Funko trades with consumer discretionary and toy names. Hasbro raised its 2026 revenue outlook to 7–9% constant currency on 20 October 2026, per Reuters via BNN Bloomberg, and Mattel's takeover interest from Authentic Brands (Wall Street Journal, 1 October 2026) lifted the group. Hasbro's raise came mainly from Magic: The Gathering and digital games, so its results track Funko less closely than the headline suggests. Funko's sales are heavily weighted to the fourth quarter, so holiday retail data moves the shares more than the other quarters do.
The evidence, claim by claim (7)
- Q3 2026 net sales $258.3M, up 3.0%; Core Collectibles $210.1M, up 4.8%; Loungefly $40.3M, down 9.8% Funko Q3 2026 earnings release (8-K) · as of
- Q3 2026 gross margin 45.2% versus 40.2% a year earlier; adjusted EBITDA $32.1M versus $24.4M; net income $7.5M Funko Q3 2026 earnings release (8-K) · as of
- FY2026 guidance reiterated: net sales flat to up 3%, gross margin 46–47%, adjusted EBITDA $100–110M, including the $25.4M Q2 tariff benefit Funko Q3 2026 earnings release (8-K) · as of
- Total debt $195.9M and cash $41.6M at Sept 30, 2026; total debt was $225.3M at Dec 31, 2025 Funko Q3 2026 earnings release (8-K) · as of
- Inventory $91.6M at Sept 30, 2026 versus $99.8M at Sept 30, 2025 Funko Q3 2026 earnings release (8-K) · as of
- Q3 adjusted EPS $0.16 versus $0.10 estimate; sales $258.3M versus $250.7M estimate Benzinga headline · as of
- Hasbro raised 2026 revenue growth outlook to 7–9% constant currency from 5–7% Reuters via BNN Bloomberg · as of
Sources
- Funko, Inc. - Form 8-K - FY2026 · sec.gov
- Funko, Inc. - Form 8-K - FY2026 · sec.gov
- Stock Titan
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