A couple of months ago my youngest son (age 11) gave me a copy of his updated wish list and it was a big departure from past years. Instead of a list of assorted items it had a dozen items in order of “what I want most” and they were all Funko Pop figures.

I took him to a local store in Boston (Newbury Comics) where they sell lots of these Funko figures and he picked out a few. The store manager talked to me about how “everyone finds one or two of these they love.” He also pointed out a locked case of “collector” Funko figures that went for much higher prices.

This led me to do a little more research (and buy some stock). Our original note (Funko Bobbleheads?) was a bit off the mark (the heads don’t “bobble”) but is still worth a read vis-a-vis the business and valuation. The IPO priced below the range at $12 in November of 2017. After languishing for a while the shares perked up in a big way, on volume.

One thing we didn’t realize is how well Funko could create “rare” Pop figures and incite a community of collectors who would go to either great lengths or great expense to acquire them. Here’s one of 10 figures that go for $1000 or more. Here’s another video that goes into more background about how Funko uses events like Comicon to generate buzz.

Now on eBay the mania has continued to surge. At the top of the list is the “rare” Stan Lee signed pair listed for $60,000. The parallel with the whole “beanie babies” craze seems valid. It’s a different demographic but it’s blossoming into a full-fledged mania.

The Business is Good

The hype is real but the company had strong operating metrics in late 2017 when they went public. At the time we put revenues at $426M. For this year they are expected to do over $600M. Analysts expect they can do $700M next year. $FNKO is also profitable and analysts are estimating earnings of $1/share next year.

Recent announcements of deals to produce Pokemon and Fortnight based characters have lent some support to future growth expectations.

Although the “fad” nature of the Pop craze has attracted (or will attract) short sellers the company has been around for a long time and shown consistent, profitable growth. And while the high prices for Funko figures in the secondary market are crazy – they don’t have a direct impact on revenue and profit for the company.