What Happened:
Shares of pop culture collectibles manufacturer Funko (NASDAQ:FNKO) jumped 17.5% in the morning session after the company reported fourth-quarter results that outperformed analysts' revenue and EPS expectations. Lastly, while revenue guidance for next quarter fell short of Wall Street's estimates, full-year adjusted EBITDA guidance was nicely ahead. Notably, the bottom line benefitted from key initiatives implemented in the fiscal year, including 1.) Elimination of unprofitable product lines and SKUs. 2.) Workforce reductions 3.) Aggressive reductions in inventory levels.
Moving on, while the market might cheer the improved profitability, management noted that some of these recent moves might impact topline growth in the year, as full-year sales growth is expected to be flat. The company also highlighted other growth headwinds, including "a softer content schedule primarily due to the recent Hollywood strikes" and "uncertainty around shipping costs primarily due to current hostilities in the Red Sea."
In addition, the company Funko announced a leadership update with Steve Nave, Chief Financial Officer (CFO) and Chief Operating Officer, expected to resign effective March 15, 2024. Yves LePendeven, the company's Deputy CFO, will serve as Acting CFO as of the same date.
Lastly, the company continued its search for a new CEO, with Michael Lunsford remaining as the Interim Chief Executive Officer until the search is complete. Overall, this was a decent quarter for Funko despite the challenges faced during the period.
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What is the market telling us:
Funko's shares are very volatile and over the last year have had 42 moves greater than 5%. But moves this big are very rare even for Funko and that is indicating to us that this news had a significant impact on the market's perception of the business.
Funko is down 8.8% since the beginning of the year, and at $6.89 per share it is trading 48.1% below its 52-week high of $13.29 from June 2023. Investors who bought $1,000 worth of Funko's shares 5 years ago would now be looking at an investment worth $347.50.
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