JaguarConsumer Weekly Callouts

**Every Saturday morning, JaguarPro clients receive a note titled JaguarConsumer Weekly Callouts highlighting several industry stories from the past week. Here is an excerpt from the May 8th note:

Toys (FNKO, HAS, MAT) – This past week, Funko (FNKO) reported its Q1 earnings that beat on both the top and bottom line (EPS of $0.24 vs $0.11 estimate and Revenue of $189.2M vs $180.3M estimate). By category, Figures (80% of total) grew +35% while Other (20% of total) rose +52% Y/Y. Star Wars: The Mandalorian continued to be the top property. By geography, International (+38%; 28% of total) has begun to catch up to the U.S. (+39%), while Europe and other key regions have started to recover quicker than previously anticipated.

Piper Sandler analyst Erinn Murphy, who raised her price target to $26 from $22, noted that outside of commentary around Q1 performance and raised guidance, the most interesting take-away from the call was the commentary around the recent majority stake acquisition of TokenWave, Funko’s foray into the Non-Fungible Token space. “The concept of NFTs aligns well with FNKO’s strong collectibles business, as the digital collectibles are protected from duplication via blockchain technology and allow the company to provide exclusive and limited drops at a very low cost.” Management indicated the company plans to leverage NFTs to tap into a wider audience, introducing physical collectors to the digital space, and vice versa. Interestingly, the blockchain technology allows the company to receive royalties in perpetuity from the subsequent sale of NFT’s on the secondary market. “We see this as a major opportunity, as recurring revenue potential is strong – especially when considering the prices high-heat NFTs are fetching in the secondhand market currently.” The company plans to roll out their NFT offering this summer, and the digital collectibles will start at $9.99.

JPMorgan Tami Zakaria was also recently out with an industry note asking the question, “When can Hasbro/Mattel enter the NFT market?” They believe entry could be in the next 6-12 months through partnerships. Both toy makers have powerful collectible-oriented brands, such as Magic The Gathering (Shown Below), Dungeons & Dragons, and Hot Wheels that are ripe for NFT monetization. They believe both HAS and MAT can launch on a limited scale rather quickly in the next few quarters through partnerships. Based on OpenSea data, NFTs are quite liquid, and believe should have high-margin flowthrough and generate recurring revenues on resales.