Labubu mania propelled Pop Mart’s (9992.HK) stock to new heights, but gravity may be catching up.
The toy company’s “risk/reward profile [looks] less favorable,” Kevin Yin, head of Asia consumer research at JPMorgan, wrote in a note to clients, adding, “We believe the valuation is priced for perfection.”
Pop Mart shares have soared 184% year to date and a staggering 427% over the past year, far outpacing the Hang Seng Index’s (^HSI) 35% and 52% gains. However, it sank over 6% on Monday in Hong Kong trading and dropped 10% over the past five trading days.
JPMorgan cut its rating on the stock from Overweight to Neutral and slashed its price target to HK$300 from HK$400.
The problem isn’t that Labubu’s brand is collapsing. Yin notes that sales momentum remains “solid,” even as resale prices and Google (GOOG) search interest have cooled. Instead, the issue is that investors have already bid up shares as if every future hit is guaranteed.
“Any small fundamental miss/negative media reports might drive underperformance,” Yin cautioned.
The analyst points out that four of seven key catalysts, from strong first-half results to a Uniqlo collaboration, “were well hit.” The success of remaining targets, such as an upcoming “Labubu & Friends” animation series, the launch of Labubu 4.0, and new interactive toys, is less certain.
Other near-term risks are mounting. Negative chatter around product quality, design, and licensing has already surfaced in Chinese media, with resale prices dropping after Pop Mart rapidly expanded production capacity. The company is trading at a rich 31 times estimated 2025 P/E and 22 times 2026 P/E — multiples that leave little margin for error.
JPMorgan said the company’s long-term strategy is still solid. Pop Mart has built a strong portfolio of 100-plus intellectual properties, operates 500 retail stores, and runs thousands of automated “roboshops” in more than 30 countries. Yin expects overseas markets to contribute more than 60% of earnings by 2027, with Labubu alone making up 35% of sales.
Yin highlighted several potential upside surprises, including stronger-than-expected Mini Labubu sales, successful cross-selling from the upcoming animation, or endorsements from global celebrities that could recreate the past viral successes. Celebrities and athletes, including Rihanna, Naomi Osaka, and Blackpink’s Lisa have all sported the plush doll. Accelerated licensing deals with international brands could also breathe new life into the franchise, Yin added.