What happened
Shares of Funko (FNKO -1.13%) jumped 16.7% in June, according to data from S&P Global Market Intelligence .The stock rose early in the month in conjunction with broader market momentum and then saw more gains following its presentation at the Jefferies 2019 Consumer Conference.
Funko President Andrew Perlmutter and CFO Russell Nickel had a public discussion with Jefferies senior analyst Stephanie Wissink on June 19. Management also held one-on-one meetings with investors later in the day, with the stock receiving a significant boost following the presentation and meetings.
Image source: Funko.
So what
Funko management detailed the company's business model during the presentation at the Jefferies conference and pointed to its ability to capitalize on major entertainment releases that take place throughout the year. The team highlighted how its wide variety of license agreements gives it the ability to tap into consumer interest in the biggest movies, television shows, and video games of the day -- and that this broad diversification makes the business particularly well positioned to benefit from the growth of pop culture merchandise and the overall entertainment industry.
Management also spoke about how the company's capital-light business model allows it to pursue a wide variety of intellectual properties, break even on a relatively small number of unit sales, and address niche audiences and markets that might not otherwise make sense for other toy companies.
Now what
Funko shares have given up most of their June gains this month, with the stock trading down roughly 13% in July so far. It's unclear what prompted the sell-off.
Funko has managed to build an impressive collection of licenses, which gives it the opportunity to continue expanding so long as demand for its core Pop vinyl figurines remains strong -- or if it can find new product designs and success in media ventures that energize sales. However, there is a significant risk that these vinyl figurines will prove to be a fad, so investors should proceed with the knowledge that it's far from a given that the business will be able to continue on its current growth trajectory.
