Small caps
🧵 THE BULL CASE FOR $TDUP & $FNKO: TWO UNDER-THE-RADAR SMALL CAPS WITH TURNAROUND POTENTIAL
1/17 🧵 2 small-cap names I’m watching for asymmetric upside: $TDUP and $FNKO. Different businesses, similar setup: improving fundamentals that may be getting overlooked. With earnings this week, here’s the bull case—and what must go right.
2/17 $TDUP is more than a used-clothing website. It operates a tech-enabled resale platform built to process, price, photograph and ship one-of-a-kind items at scale. That infrastructure is hard to replicate—and could become more valuable as resale expands.
3/17 The numbers are moving: Q2 revenue hit a record $90.8M (+17% YoY). Active buyers reached 1.77M (+21%), while orders rose 22%. To me, that’s a better signal than growth driven purely by price increases.
4/17 $TDUP’s Q2 gross margin was 79.9%, and adjusted EBITDA rose to $4.8M from $3.0M. That suggests real operating leverage is possible IF fulfillment and marketing costs scale slower than sales. Caveat: GAAP net loss was still $5.9M.
5/17 At the Nov. 3 close, $TDUP was ~$2/share, or ~$263M in market value. Against 2026 revenue guidance of ~$346M at the midpoint, that’s ~0.76x sales. Not automatically cheap—but intriguing if growth holds and profits improve.
6/17 The tailwind is real: ThredUp/GlobalData projects global secondhand apparel to reach $393B by 2030. Gen Z, value-focused shopping and brand-led resale could support long-term demand. $TDUP doesn’t need to own that whole market to benefit.
7/17 New distribution matters too: in September, $TDUP launched live shopping on Whatnot from its distribution centers. If social commerce boosts discovery and inventory turnover without ballooning acquisition costs, that’s another growth lever.
8/17 The near-term test: $TDUP reports Nov. 4 after the close. Q3 guide: $87–89M revenue, 78–79% gross margin, ~4% adjusted EBITDA margin. I’ll watch buyer/order growth, promotional pressure and whether management can defend its Q4 margin outlook.
9/17 Now $FNKO. The thesis isn’t explosive top-line growth—it’s a branded collectibles business showing signs of a turnaround. Q2 sales climbed 7.4% to $207.7M, led by +9% in core collectibles. Europe grew 19.4%.
10/17 The operating story is stronger than revenue alone: SG&A fell to 38.4% of sales vs 42.5% a year earlier. Management is cutting weaker SKUs, especially in Loungefly, and focusing on products with better demand and returns.
11/17 Important nuance: $FNKO’s eye-catching Q2 gross margin of 56.6% and adjusted EBITDA of $40.9M INCLUDED a $25.4M tariff-related benefit. Strip that out and EBITDA is ~$15.5M—not $40.9M. Still progress, but don’t confuse a one-off with recurring profit.
12/17 The brand portfolio is the upside option: Funko Pop!, Loungefly and Mondo tap movies, anime, gaming, sports and collector culture. Better product timing, faster releases and higher hit rates could lift margins even without massive sales growth.
13/17 At the Nov. 3 close, $FNKO’s equity value was ~$352M vs ~$933M in trailing sales (~0.38x). But debt matters: total debt was $201M at Q2, down from $225M at year-end. The opportunity is cash generation + deleveraging, not just a ‘low P/S.’
14/17 $FNKO reports Nov. 5. Q3 guidance: roughly flat sales, 43–44% gross margin and $25–30M adjusted EBITDA. A beat, stronger core collectibles, cleaner inventory and more debt reduction could reinforce the turnaround narrative.
15/17 Here’s the optionality: $FNKO guided to $100–110M in 2026 adjusted EBITDA, but $25.4M comes from a tariff-related benefit. That implies ~$75–85M excluding it. If that earnings base proves repeatable, the valuation could get a second look.
16/17 What could break the thesis? $TDUP: promotions, weak buyer spending, and high processing costs. $FNKO: retail softness, inventory misses, licensing dependence, and leverage. The next reports matter more than the story alone.
17/17 My bull case: $TDUP = expanding resale market + improving unit economics. $FNKO = known brands + margin recovery + debt reduction. Both are speculative turnaround/growth plays, not guaranteed winners. I want confirmation in the numbers before getting more aggressive. NFA.
