Home Investment PLBY Group vs. Funko: Which NFT Stock Could Fetch Higher Returns?

PLBY Group vs. Funko: Which NFT Stock Could Fetch Higher Returns?

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Investors are showing a keen interest in Non-fungible token (NFT) stocks. NFTs are digital assets like art, music, or videos created using blockchain technology where each NFT has a unique digital signature that makes it difficult for NFTs to be exchanged for one another, and no two NFTs can be equal.

NFTs offer content creators a unique way to monetize their content through royalty payments or by selling their art directly to consumers. According to a Forbes Advisor report, since November 2017, an amount of approximately $174 million has been spent on NFTs.

Yesterday, eBay (EBAY) also added NFTs to the list of items that can be bought at its online marketplace.

Using the TipRanks Stock Comparison tool, let us compare two NFT stocks, Funko and PLBY Group, and see how Wall Street analysts feel about these stocks.

Funko (FNKO)

Funko is a pop culture consumer products company whose products include plush and action toys, vinyl figures, apparel, board games, and accessories. Earlier this month, the company announced its Q1 results with revenues increasing 38% year-on-year to $189.2 million, while adjusted EBITDA came in at $29.8 million versus $10.6 million in the same quarter a year ago.

In FY21, FNKO expects sales to grow between 33% and 38%, while the adjusted EBITDA margin is forecast between 14% and 14.5%. The company expects adjusted earnings to land between $0.98 and $1.12 per diluted share.

Last month, the company made its foray into NFTs by acquiring a major ownership stake in TokenWave for an undisclosed amount. TokenWave has developed TokenHead, a website and mobile app that showcases and tracks around 10 million NFTs and has approximately 100,000 visits each day. It is available on both the iOS and Android platforms.

This investment is expected to expand FNKO’s pop culture platform to include digital assets. The company expects to launch its initial NFTs in June this year, priced at $9.99, that will feature a unique property every week. The company will be selling its NFTs on the WAX platform, a decentralized wallet that uses blockchain technology.

Funko’s CEO, Brian Mariotti said, “Our strategy in this space is clear – bring the value-added NFT opportunity to our licensing partners to leverage our broad range of existing pop culture content across Television, Movies, Sports, Music, Anime, Video Games and Comic Books. Our amazing licensing partners are excited about our entry into this new digital space and we believe the diversity of our licensing portfolio sets us up for long-term success.”

“Our ability to combine Funko Pop! digital NFTs with exclusive Funko Pop! Vinyl Figures has the potential to be a game changer. By backing the rarest of the Funko NFTs with exclusive redeemable Funko Pop!s, we are poised to enter the NFT market in a very unique manner,” added Mariotti.

The company elaborated on its entry into NFTs at its earnings call. FNKO believes that NFTs combined with its physical consumer products offer FNKO fans a “very accessible way” to become a collector of NFTs.

FNKO also said that the rarest NFTs will get exclusive rights to physical Funko figures for free. Once an NFT is sold out, it will only be available for resale in secondary markets and the company, along with its licensing partners, will receive royalty payments on every additional transaction.

The company believes that the NFT business will most likely have higher profit margins compared to its consumer products business, but it does not expect margins to be materially affected for the next year or two. FNKO also perceives greater cross-selling opportunities as NFT buyers who have never purchased the company’s physical products, could begin purchasing them, and vice-versa.

It is important to note that FNKO’s FY21 guidance does not include any notable contribution from revenues earned through NFTs. (See Funko Inc stock analysis on TipRanks)

Last month, following FNKO’s investment in TokenWave, JP Morgan analyst Tami Zakaria raised the price target from $20 to $25 and reiterated a Hold rating on the stock. Zakaria perceives the risk to return trade-off as attractive for this investment and anticipates that NFTs could result in a low-to-mid-single-digit increase in sales in FY21, and a mid-single-digit rise in FY22.

Overall, consensus among analysts is a Moderate Buy based on 4 Buys and 4 Holds. The average analyst price target of $23.13 indicates downside potential of around 1.9% from current levels.

PLBY Group (PLBY)

PLBY Group is a leisure, lifestyle, and pleasure company, and owner of the Playboy brand. Yesterday, the company announced its first-quarter results with revenues of $42.7 million, up 34% year-on-year. This rise in revenues was mainly driven by a 114% year-on-year growth in direct-to-consumer revenues.

However, the company’s net losses widened to $5 million in Q1 versus a loss of $2.4 million in the same quarter last year driven by $6.3 million in one-time expenses related to the closing of a business acquisition, and stock-based compensation expenses.

Ben Kohn, CEO of PLBY Group stated, “Our strong first quarter financial performance reflects the exciting growth potential of our direct-to-consumer business, which experienced triple digit revenue growth year-over-year as we successfully increased merchandising, cross-selling, and influencer marketing programs.”

“We’re also thrilled by the recent performance of our first NFT art drop, a symbol of the infinite product experiences we can build off the back of our iconic flagship brand and rich archive. We are in the early innings of unlocking the tremendous potential of our intellectual property and global fan base and remain focused on investing today in opportunities to drive superior long-term growth and deliver substantial long-term value for our shareholders,” Kohn added.

Last month, PLBY announced a partnership with Nifty Gateway, an all-in-one platform owned by Gemini that can be used to buy, sell and store collectibles and digital art. The partnership will result in the creation of a series of digital art collaborations between Playboy and Nifty on Nifty Gateway’s marketplace that uses blockchain technology.

PLBY elaborated more on the partnership and stated, “The longer-term Playboy x Nifty relationship will focus on three key areas: artist collaborations with Playboy’s vast art and photography archive, an ongoing effort to incubate and commission new artist NFT works including providing grants specifically designed to support emerging and underrepresented artists entering the NFT art community, and the curation and sales of Playboy’s iconic art collection in NFT form.”

This partnership resulted in the launch of Playboy’s first Playboy x Slimesunday art drop earlier this month that consisted of original art developed by Slimesunday in collaboration with Playboy’s editors and curators of its archives.

PLBY stated in its earnings call that this art drop generated sales of approximately $1 million in 24 hours, including a single piece that was sold for $250,000.

The company’s partnership with Nifty will also result in a Pride-themed NFT curation in June in collaboration with digital artist, Blake Kathryn.

PLBY believes that its Playboy-themed NFTs could result in effective cross-selling of its physical products with digital artworks and is also looking at loyalty programs based on blockchain technology. (See PLBY Group stock analysis on TipRanks)

Following PLBY’s earnings, Canaccord Genuity analyst Austin Moldow raised the price target from $28 to $52 and reiterated a Buy on the stock. Moldow said in a research note to investors, “The company is pursuing a long-term strategy when it comes to NFTs and other burgeoning technologies like blockchain, VR, and AR, working towards the integration of the physical and digital. We reiterate that PLBY seems to be pursing an NFT sales strategy that relies upon creation of new works based on its IP, creating a “never-ending” supply of items.”

Overall, consensus among analysts is a Strong Buy based on 3 unanimous Buys. The average analyst price target of $45.67 indicates upside potential of around 4.2% from current levels.

Bottom Line

PLBY’s and FNKO’s foray into the NFT space seems to be a way of monetizing their consumer products through a digital format and generate cross-selling opportunities in the process.

Analysts appear to be more bullish on PLBY than FNKO and based on their upside potential over the next 12 months, PLBY seems to be the better pick.

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