Bear of the Day: Funko (FNKO)

Core Insights - Funko has experienced a significant decline in its business, moving from a dominant position in collector culture to facing substantial challenges in its latest earnings report [1][2] - The company's second-quarter 2025 report revealed an adjusted net loss of $0.48 per share, which was worse than the expected loss of $0.44, and revenue fell to $193.5 million, a 21.9% year-over-year decline [2][3] - Gross margin decreased sharply from 42% to 32.1%, and adjusted EBITDA was negative at $16.5 million, indicating worsening profitability [2][3] Financial Performance - Core Collectibles sales dropped approximately 16%, Loungefly-branded products fell nearly 23%, and the "Other" category saw a staggering decline of almost 79% [3] - The overall decline in sales suggests issues beyond macroeconomic factors, pointing to brand fatigue and market oversaturation [3] Market Sentiment - The technical outlook for Funko's shares is negative, remaining below the 200-day moving average and in a persistent downtrend [4] - Analysts have not revised earnings upward in the last 90 days, with multiple downward revisions indicating a lack of confidence in the company's future performance [4] - Management's decision to withdraw full-year guidance reflects significant uncertainty, leading the market to view Funko as a stock to avoid [4] Industry Context - Funko operates within the Consumer Products – Discretionary industry, which ranks in the top 39% of the Zacks Industry Rank [5] - Other companies in the industry, such as Betterware de Mexico and Central Garden and Pet, are currently viewed more favorably within the Zacks Rank [5]