Pop Mart, the Beijing-headquartered company known for its popular Labubu plushies, has experienced a tumultuous week in the stock market. Morgan Stanley recently cut Pop Mart from its Americas-recommended list. Consequently, the shares have tanked despite the company’s continued execution showing through in very healthy sales growth, well North of 30%+ YoY.
In fact, recent demands from Chinese Xinhua state media has called for greater regulation over blind-box toys and trading cards. This especially goes after products specifically advertised to kids below eight years old, intensifying the backdrop of ongoing stock market volatility. Proposed legislation would have required age verification at the point of sale and parental consent for children buying online. These possible new regulations would have a huge affect on the toy industry, including on product lines like Pop Mart’s.
Even as uncertainty looms about possible new regulations, Pop Mart has been publicly declaring strong sales growth. According to the most recent revenue numbers, the Americas market has more than doubled—making us their second-biggest international market, after Europe. This impressive year’s growth of over 1,000% now represents approximately 2.26 billion yuan. Retreating from overseas, for now, Pop Mart’s biggest international market is the Asia-Pacific region, minus China. Its growth has been nothing short of spectacular at 257.8% to 2.85 billion yuan.
Analysts aren’t ready to bet on the long-term sustainability of this growth. Jeff Zhang, an equity analyst at Morningstar, issued a warning sign about shifting consumer preferences. He noted how Pop Mart’s products continue to take the world by storm. Despite that shift, he emphasized, there’s no promise that consumers will continue to prefer them five to ten years down the line.
“Shares likely remain overpriced as investors are overlooking the high business risk in the long run, in our view,” – Zhang
Pop Mart’s Labubu line includes these razor toothed, big eared terrors that are sufficiently ugly & cute. More recently, Labubu keychains have been making the rounds, featuring on the bags (now keychain-compatible!) of celebrities like Rihanna and K-pop star Lisa from Blackpink. The keychains, which retail at an affordable $30, have only added to the brand’s rising buzz.
While the company continues to address these challenges, they make it clear that their intellectual property is still central to how they plan to operate their business moving forward. Against this backdrop of regulatory and macroeconomic pressures, Pop Mart not only survives, it thrives. Their cutting-edge artistry and commanding market footprint enrapture shoppers across the globe.