What happened

Shares of toymaking company Funko (FNKO -0.41%) surged 21.7% through noon ET Friday after the company reported much-stronger-than-expected (read: "much-less-weak-than-expected") financial results yesterday evening.

Analysts had forecast that Funko would lose a staggering $0.92 per share on sales of only $235.6 million for its first quarter of 2023. As it turned out, the loss was bad but not that bad. Funko lost $0.49 per share, and its quarterly sales were $251.9 million.

So what

That's the good news. Now here's the bad.

Funko beat estimates on sales and earnings, yes. But its quarterly sales declined 18% year over year, and the company flipped from a Q1 2022 profit to a Q1 2023 loss. (In fact, when calculated according to generally accepted accounting principles (GAAP), Funko lost not $0.49 per share but actually $1.17 per share.) Yet laughing in the face of disaster, Funko CEO Brian Mariotti decided to call the results "a strong start in 2023."

Arguing that "enthusiasm for the brand remains strong" and that Funko has "made strong progress in reducing costs and right sizing our business," management raised Funko's forecast for "adjusted EBITDA" through the end of 2023 to between $65 million and $75 million.

Now what

And yet it's not entirely clear what that would mean for investors.

On the one hand, you've got management forecasting this malleable adjusted EBITDA number for 2023 (EBITDA means earnings before interest, taxes, depreciation, and amortization, but it's never 100% certain what the "adjusted" part means). Compared to historical data from S&P Global Market Intelligence, that looks to be as much as twice last year's EBITDA.

On the other hand, though, Funko is forecasting about a 21% year-over-year decline in sales in Q2 ($240 million to $260 million) and a 5% to 10% decline in sales for the full year.

Management declined to give a forecast for GAAP earnings, but analysts aren't optimistic; they're forecasting a $0.71-per-share loss. If you ask me, that doesn't sound particularly optimistic for Funko stock this year.

Then again, these same analysts have Funko turning its business around next year and earning a $0.91-per-share profit. If that prediction holds true, then Funko stock at today's share price of $11 and change actually doesn't look too expensive -- about 12.5 times earnings.

If that's the way things do end up turning out, then 2023 just might be the year Funko finally turns things around -- and turns into a winner.