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Why Funko's Stock Is Surging 25% Today

By Rich Duprey – May 8, 2020 at 2:32PM

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Its earnings report shows the gain wasn't based on higher sales.

What happened

Funko (FNKO -0.65%) shares were soaring 25% higher in late-day trading on Friday after reporting earnings the day before and filing an amended credit agreement that gives the collectible-toy maker more breathing room.

So what

First-quarter sales tumbled 18% to $136.7 million, generating net losses of $0.12 per share, $0.05 worse than the $0.07 per share loss analysts were expecting.

Dollar symbol with a rising arrow

Image source: Getty Images.

However, the toy maker also filed a new agreement with its creditors that waived certain financial covenants and should provide it more flexibility in meeting the unique conditions of the current environment until after the waiver period ends.

Now what

Much of Funko's business revolves around the release of toys based on movie and TV content, but due to the coronavirus pandemic, all such new creative content has been put on hold. Moreover, retailers that would sell such products, such as GameStop (GME 6.74%), which is one of Funko's top outlets, have had their stores closed.

Yet without new content coming to market, even selling products on Amazon.com (AMZN -0.64%), which is another key sales channel, diminishes the impact of their availability. Funko has been suffering from slower sales, and its shares had lost over 86% of their value since their high point last September.

The run-up in the stock suggests investors believe it is not going out of business any time soon.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Funko, Inc. Stock Quote
Funko, Inc.
FNKO
$19.84 (-0.65%) $0.13
Amazon.com, Inc. Stock Quote
Amazon.com, Inc.
AMZN
$114.41 (-0.64%) $0.74
GameStop Corp. Stock Quote
GameStop Corp.
GME
$26.13 (6.74%) $1.65

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