As prices of the popular IP LABUBU collapse in the secondary market, Pop Mart’s stock tumbled 7.5% on September 8 to close below HK$300.
However, Morgan Stanley believes that the market may be overreacting to isolated high-frequency data and the decline is driven more by technical and sentiment factors than fundamentals, and maintains an “Overweight” rating on Pop Mart.
The bank’s core view is that secondary market prices cannot effectively reflect real supply and demand conditions and it emphasized that the secondary market accounts for only a small portion of total supply and demand.
The pressure on Pop Mart’s stock price is partly due to the continuous decline in the secondary market prices of Pop Mart’s core IP, Labubu, with first-to-third generation products dropping 3–11 yuan per day, and the average price for secondary transaction of the fourth-generation Mini Labubu shrinking by over 50% compared to the initial release price. (Read more: Pop Mart Tumbles Despite Hang Seng Incision, Market Value Plunges Nearly HK$30 Bn as Labubu Secondary Prices Collapse)
The drastic price swings have led some scalpers to post announcements that they are “pausing purchases,” waiting for the market to recover. Speculators who previously invested tens of thousands of yuan in stockpiling now face financial losses.
Morgan Stanley notes in the report that while secondary market prices are the only easily trackable high-frequency data, they can be “misleading.”
The secondary market accounts for only a small fraction of total supply and demand, and more importantly, Pop Mart has been actively increasing supply capacity and cracking down on scalpers, which itself reduces the premium in the secondary market, it says.
The report also notes that this is the third time the market has been concerned about LABUBU secondary prices, indicating this may be a repeated overreaction.
Morgan Stanley also noted that a large-scale short-covering was triggered before Labubu was included in the Hang Seng Index, and last Friday, 6.3 million shares were sold short, accounting for 31% of that day’s trading volume.
The bank maintains an “Overweight” rating on Pop Mart and lists it as a “Top Pick,” saying that trading at a forward 2026 P/E of 24 times, Pop Mart’s current valuation presents an opportunity for investors, and its strong IP portfolio and global expansion potential remain unchanged.
Morgan Stanley acknowledges that LABUBU is a key growth driver but emphasizes that it’s not the company’s only popular IP. Data shows that in the first half of 2025, LABUBU contributed 35% of sales, while other core IPs including Molly, Skullpanda, Dimoo, and Crybaby together also contributed 35%.
The bank also sees strong growth momentum in other IPs. For example, Crybaby accounted for 9% of first-half sales, and Twinkle Twinkle accounted for 3%. Morgan Stanley expects the sales share of these two series to increase, thereby achieving a more diversified revenue structure.
In addition, Morgan Stanley believes Pop Mart’s growth approach remains “disciplined and restrained.” For example, although offline sales in Greater China surged 117% in the first half of the year, the company only added 12 stores net and it even delayed some LABUBU new releases due to supply shortages of existing SKUs.
This cautious expansion strategy, combined with a DTC (direct-to-consumer) and proprietary IP business model, helps maintain closer engagement with fans, supporting the long-term sustainability of both business and IP, Morgan Stanley notes.