Pop Mart’s $42.5b rout casts doubt on life after Labubu

BEIJING – A relentless sell-off in Pop Mart International Group shares is showing little sign of bottoming out as scepticism deepens over the toymaker’s Labubu-led growth.

The stock plunged more than 30 per cent over five sessions through March 31 after the company’s earnings results showed a rising dependence on the snaggle-toothed monster dolls.

That extended a drop from its record high in August to nearly 60 per cent, wiping out about US$33 billion (S$42.5 billion) from its market cap.

Pop Mart’s latest earnings tipped market sentiment decisively bearish. A wave of price-target cuts, rising short interest, and a stock slide that persisted despite multiple buybacks signal growing concerns over the company’s ability to replicate Labubu’s success with other products.

“We don’t think the market has fully factored in a long down-cycle scenario with a much lower margin,” said Ms Sammi Xu, a consumer analyst at Deutsche Bank, who downgraded the stock to “sell” after its results.

Weakening sales overseas and in China, high inventory and a continuous downward revision on earnings are the main pressure points in 2026, she said. 

The popularity of Labubu dolls exploded globally in 2025 – a rare example of Chinese soft power resonating in Western markets – sending Pop Mart shares soaring about 300 per cent from early 2025 to an all-time high in August. But persistent worries that the Labubu craze could fade have weighed on the stock since.

Efforts to diversify its intellectual property (IP) have yet to emerge as meaningful growth drivers. The Labubu-led Monsters series accounted for about 40 per cent of total revenue in 2025, up from 23 per cent in 2024. Meanwhile, other high-profile figures including Crybaby and Molly posted weaker-than-expected sales. 

Pop Mart’s inventory turnover days have also increased 21 per cent from a year ago to 123 days as at the end of 2025. The company attributed the rise to longer transportation lead time, higher sales to markets abroad and a wider network of stores.

Even cheaper valuations and stock buybacks are not enough to lure investors. Pop Mart has purchased around HK$1.3 billion (S$214 million) worth of shares since a record daily drop of 23 per cent on March 25. The stock now trades at a record low level of 10.3 times forward earnings, compared with its three-year average of 24 times.

“The current share price isn’t expensive, but that can be said of many Chinese consumer stocks trading at similar valuations,” said Mr Angus Lee, a fund manager at Sparx Group. “What has set Pop Mart apart is the narrative, whether it’s Labubu or the next hit IP and their ability to succeed globally, but right now, that story feels uncertain.”

To win back investors, Pop Mart needs to demonstrate it can sustain the popularity of its signature IPs from Labubu to Molly, while showcasing its ability to introduce the next blockbuster character, he said. Mr Lee, who started accumulating Pop Mart shares early in 2025, exited all his positions after the firm announced its results. 

A Pop Mart spokesperson declined to comment. 

The company has accelerated the launch of other emerging characters such as Skullpanda and Twinkle Twinkle, unveiling new collections and crossover series that blend various IPs. At the same time, it is working on a broader push to extend Labubu’s global appeal from collaborations with Sanrio and the FIFA World Cup to a planned animated film in partnership with Sony Pictures Entertainment.

Pop Mart shares fell as much as 2.3 per cent in early April 2 trading after closing 1.2 per cent higher on April 1.

For now, short-sellers have added to their positions in the stock with 123 million shares borrowed and sold short, up 16 per cent from before the results, according to S3 Partners data. Options traders also loaded up bearish contracts, pushing put volume on Pop Mart to a record high on April 1.

“The market underestimates the challenges ahead,” said Ms Melinda Hu, a consumer analyst at Bernstein, who was for months the lone sell-side bear on the stock. “Signs of slower growth, margin normalisation, or IP fatigue could drive meaningful multiple compression, and consensus forecasts are likely to be revised downwards.” Bloomberg