Funko Plummets 36% on Q2 Earnings Miss and Tariff Woes – Is the Bottom Near?

Summary
• Funko’s stock nosedives 36% intraday to $2.34, hitting its 52-week low of $2.22
• Q2 revenue beats estimates but adjusted EPS and EBITDA miss badly, signaling operational strain
• DA Davidson cuts price target to $5, citing tariff-driven margin pressures and debt concerns
• Technicals show bearish momentum with RSI at 12.3 and MACD in negative territory

Funko’s (FNKO) dramatic selloff reflects a perfect storm of earnings underperformance and macroeconomic headwinds. The stock’s collapse to $2.34—a 36% drop from its previous close—underscores investor fears over tariffs, debt refinancing risks, and weak operating margins. With the sector grappling with trade uncertainty and Funko’s own guidance for a slow recovery, the question looms: is this a buying opportunity or a deeper abyss?

Q2 Earnings Disappointment and Tariff Uncertainty Fuel Sell-Off
Funko’s Q2 results exposed a widening gap between revenue resilience and profitability. While sales of $193.5 million beat estimates, the 21.9% year-on-year decline and a non-GAAP loss of $0.48 per share (missing by 11.6%) signaled deteriorating margins. Compounding this, DA Davidson’s price target cut to $5—from $7—highlighted tariff-driven cost pressures and debt refinancing risks. The stock’s intraday plunge to $2.22, its 52-week low, reflects a loss of confidence in management’s ability to navigate these challenges, particularly with operating margins at -18% and free cash flow negative $22.18 million.

Apparel & Luxury Sector Pressured by Tariffs as Nike Holds Steady
The Apparel, Accessories & Luxury Goods sector faces headwinds from U.S.-China trade tensions, with European brands bracing for 15% import tariffs. Nike (NKE), the sector’s leader, remains relatively stable, trading down just 0.38% intraday. Funko’s 36% drop starkly contrasts with Nike’s resilience, underscoring Funko’s vulnerability to margin compression and debt concerns. While the sector grapples with tariffs, Funko’s structural issues—declining revenue, negative EBITDA, and a 26% free cash flow yield—make it a laggard in a defensive environment.

Bearish Technicals and High-Leverage Puts Signal Aggressive Short-Side Play
• 200-day MA: $8.456 (far above current price)
• RSI: 12.3 (oversold)
• MACD: -0.284 (bearish divergence)
• Bollinger Bands: Price at $2.34, near lower band ($3.32)
• Support/Resistance: 30D support at $3.59–$3.62, 200D at $3.95–$4.17

Funko’s technicals paint a dire picture. The stock is trading below all major moving averages, with RSI in oversold territory and MACD in a deep bearish trend. Key levels to watch include the 52-week low of $2.22 and the 200D MA at $8.456. While the 30D support at $3.59 offers a potential rebound zone, the 200D resistance remains a distant target. The sector’s exposure to tariffs and Funko’s debt refinancing risks suggest a prolonged bearish phase.

Top Options:
• FNKO20250815P2.5 (Put):
- Strike: $2.50, Expiry: 2025-08-15
- IV: 117.41% (extremely volatile)
- Delta: -0.585 (moderate sensitivity)
- Theta: -0.001436 (slow time decay)
- Gamma: 0.946 (high sensitivity to price swings)
- Turnover: $3,824 (liquid)
- Leverage: 9.88% (high)
- Payoff (5% downside): $0.28 (max(0, 2.22 - 2.50))
- Why: High leverage and volatility make this put ideal for a sharp drop below $2.22.

• FNKO20250815C2.5 (Call):
- Strike: $2.50, Expiry: 2025-08-15
- IV: 108.37% (volatile)
- Delta: 0.4025 (moderate sensitivity)
- Theta: -0.013712 (rapid time decay)
- Gamma: 1.017 (high sensitivity)
- Turnover: $7,139 (liquid)
- Leverage: 23.70% (very high)
- Payoff (5% downside): $0.00 (max(0, 2.22 - 2.50))
- Why: High leverage for a rebound above $2.50, but time decay is a risk.

Hook: Aggressive bears should prioritize FNKO20250815P2.5 for a short-term bet on the 52-week low breakdown. Bulls may consider the call if a rebound above $2.50 materializes, but time decay is a critical factor.

Backtest Funko Stock Performance
The backtest of FNKO's performance after a -36% intraday plunge shows favorable results, with win rates and returns indicating positive short-to-medium-term gains. Here's a detailed analysis:1. Frequency and Win Rates: The event occurred 623 times, with a 3-day win rate of 51.36%, a 10-day win rate of 52.97%, and a 30-day win rate of 52.65%. This suggests that FNKO tends to recover positively in the immediate aftermath of such large intraday drops.2. Returns: The average 3-day return following the event is 0.93%, with a maximum return of 5.13% on day 58. The 10-day return is slightly higher at 1.77%, with a maximum return of 6.28% on day 113. The 30-day return is 2.14%, with a maximum return of 7.59% on day 182. These returns indicate that FNKO often rebounds and can exceed initial expectations.In conclusion, FNKO's performance after a -36% intraday plunge is generally positive, with a high probability of recovery and gains in the short to medium term. Investors might consider this information when assessing the stock's resilience and potential for bounce-back following significant downturns.

Bullish Catalysts Needed to Reverse the Slide – Watch for $2.22 Support
Funko’s 36% intraday drop reflects a confluence of earnings underperformance, tariff risks, and debt concerns. While the stock’s technicals suggest a bearish continuation, a rebound above $2.50 could trigger short-term volatility. Investors should monitor the 52-week low of $2.22 as a critical support level and watch for catalysts like a new CEO appointment or tariff resolution. Nike’s (NKE) -0.38% move highlights the sector’s defensive nature, but Funko’s structural challenges make it a high-risk play. Action: Short-term bears should target the FNKO20250815P2.5 put for a sharp drop below $2.22, while bulls should wait for a confirmed rebound above $2.50 before considering longs.