Funko Inc

NFT free option

Funko is a toy maker with ~80% of revenue coming from its POP! product.

POP!s are collectible figures of popular culture characters. They are seen frequently in toy sections of mass (Walmart, Target) or speciality retail (GameStop) shops.

Other 20% of revenue comes from newer business lines shown below.

Funko has licensing deals across TV, Movies, Music, Sports, Games, Anime etc to use their characters to capitalise on popular culture demand as trends emerge.

Majority of Funko’s sales come from brick-and-mortar retail and thus sales fell in 2020 amidst lock downs and rebounded to all time high in 2021.

Outlook for POP! looks strong ahead as world continues to reopen. Funko also has promising pipeline for POP!. For example, management highlighted record reception for Squid Game POPs which is due in 2022.

Squid game POP! shop:

https://www.netflix.shop/pages/squid-game-funko-pop

Funko trades at 7 times EV to EBITDA which is cheap historically. It only traded cheaper than current valuation during 2020 peak covid scare.

Given all the above, Funko looks like good value here.

What makes it even more exciting is a free option you get on its new NFT business.

Funko joined the NFT craze and sold its first NFT in August 2021. Since then, Funko has been releasing few new NFT drops every month.

All their NFT drops can be found here:

https://digital.funko.com/drops

Funko just announced a Star Trek NFT drop for a value of $720K:

https://digital.funko.com/drop/12/star-trek-series-1

These drops get oversubscribed multiple times & get sold out in minutes with tens of thousands in queue. The rare ones have traded for $15K in secondary market (original price is either $10 or $30).

This NFT business is brand new, and it not reflected in financial performance yet. I expect this to be high growth & very high margin business compared to physical toysbusiness.

While companies even remotely involved in metaverse, crypo, NFT etc trade at eye popping valuations, with Funko you get a free option on the NFT business.

Bottomline: Funko is cheap just on the legacy physical toys business + you get free option on NFT.