Funko Q2 Earnings: Analysts Keep Buy Rating Despite Adverse Impact from China Pause

Funko's Q2 earnings report was negatively impacted by a pause in U.S.-bound orders from China, but analysts at Texas Capital Securities remain bullish, keeping a Buy rating on the toy company. They view Funko favorably despite the recent slump, citing the company's resilience in a challenging market.

Title: Funko's Q2 Earnings Report: Challenges and Analyst Optimism

Funko Inc. (NASDAQ: FNKO), a leading manufacturer of pop culture collectibles, reported its Q2 2025 earnings, revealing a significant decline in sales and profitability. The company's revenue fell by 21.9% year-over-year to $193.5 million, missing analysts' expectations by $9.7 million [1]. Despite the revenue shortfall, Funko's adjusted earnings per share (EPS) of $-0.48 per share were also below forecasts, resulting in a 11.6% miss [1].

The primary factors contributing to Funko's underperformance were disruptions from U.S. tariff policies. The company experienced a pause in U.S.-bound orders from China, which led to a 22% year-over-year decline in net sales [3]. Management attributed the pause to the tripling of tariffs on imports from China, causing direct import customers to halt their orders [1].

Funko responded to these challenges by implementing several strategic measures. The company reduced its workforce by approximately 20%, accelerated production shifts out of China, and raised prices to offset higher import duties [1]. Additionally, Funko amended its credit agreements to secure covenant waivers and filed for an at-the-market equity offering to bolster liquidity [1].

Despite the quarter's challenges, analysts at Texas Capital Securities remained bullish on Funko, maintaining a Buy rating. Eric Wold, an analyst at the firm, highlighted the company's resilience in a challenging market and the potential for longer-term margin-boosting initiatives to come to fruition in the second half of 2025 [2]. Wold also noted the signs of underlying consumer demand improvement at the point of sale (POS) and the potential for further gross margin expansion.

Looking ahead, Funko expects net sales in the second half of the year to decline by high single digits and projects an adjusted EBITDA margin in the mid to high single digits for the same period [3]. The company anticipates an improvement in Q4 results over Q3, bolstered by strategic initiatives and product launches, including the introduction of Pop Yourself in Europe.

References
1. [1] https://ca.finance.yahoo.com/news/fnko-q2-deep-dive-tariffs-072450509.html
2. [2] https://seekingalpha.com/news/4484029-funko-is-sized-up-favorably-by-analysts-after-its-post-earnings-slump
3. [3] https://www.investing.com/news/transcripts/earnings-call-transcript-funko-q2-2025-results-miss-forecasts-stock-dips-93CH-4179360