There's uncertainty ahead for toymaker Funko , and investors should take note, according to JPMorgan. The firm downgraded shares of Funko to neutral from overweight and lowered its price target to $16 from $32. That implies downside of nearly 18% for the stock. The company on Thursday reported earnings that fell short of Wall Street's expectations and announced a less-than-rosy forward guidance. Funko reported earnings of 28 cents per share, while analysts expected 50 cents per share, according to StreetAccount. Funko also slashed its full-year earnings outlook. Funko shares traded 35% lower in the premarket. "Despite 3Q sales coming in well above our in-line forecast, the company lowered its full-year revenue guidance with 4Q implied down 5% YOY," wrote Megan Alexander in a Friday note. "While the latter was somewhat expected given the tougher macro backdrop, well-known inventory challenges at retail, and lateral reports, the EPS cut was contrary to our preview and far worse than bearish expectations." Tough to endorse The company said that its direct sales are still strong and that its project miss in the fourth quarter is because retail de-stocking. "We view this as the glass half full view and highlight the 'unexpected cost pressures' related to its infrastructure challenges as showing a lack of operational visibility, while the expected margin recovery was a key underpinning to our June upgrade," said Alexander. In addition, although JPMorgan suspected inventory issues at the retailer, management's expectations of a sharp reversal in the upcoming quarter creates a red flag that de-stocking could continue into 2023. That suggests that next year is heavily weighted to the second half, as such stories are hard to endorse especially in an environment where the consumer is slowing. "We believe valuation will be handcuffed until there is more visibility on the earnings outlook (especially a small cap company)," said Alexander. — CNBC's Michael Bloom contributed to this report.