Funko(NASDAQ: FNKO) stock is seeing big gains in Friday's trading. The collectible-figurine specialist's share price was up 18.4% as of 1:45 p.m. ET, according to data from S&P Global Market Intelligence.
Funko published third-quarter earnings results after the market closed yesterday, and its sales and earnings performance topped Wall Street's expectations. The company reported a non-GAAP (adjusted) profit of $0.03 per share on sales of $312.9 million, beating the average analyst earnings target by $0.08 per share and the average sales target by roughly $23.3 million.
Funko's performance beats a low bar
While Funko's sales dropped roughly 14% year over year in Q3, its performance still managed to beat the market's expectations. Similarly, adjusted earnings per share dipped 89% compared to the same period last year but still managed to beat the average Wall Street target.
Is Funko stock a buy?
Funko is making progress when it comes to improving operating efficiency and reducing costs, but the business's long-term trajectory remains uncertain. The company's core vinyl figurines have enjoyed a successful run, but there's a significant risk that they will ultimately wind up being a fad.
Recent sales declines suggest that Funko Pops are losing favor with customers, and it's not clear that there are any major positive-performance catalysts on the horizon.
FNKO PE Ratio (Forward) data by YCharts.
While the company may look cheaply valued trading at roughly 14 times this year's expected earnings and less than 45% of expected sales, there's a significant risk that business performance will decline going forward. Despite the solid Q3 performance beat, it's still hard to get excited about Funko's long-term outlook.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
