Why Labubu maker Pop Mart may see its stock bubble burst

Core Viewpoint - Pop Mart's stock has experienced significant growth, but analysts suggest that the current valuation may be overly optimistic, indicating a less favorable risk/reward profile [1][2] Stock Performance - Pop Mart shares have surged 184% year-to-date and 427% over the past year, significantly outperforming the Hang Seng Index, which gained 35% and 52% respectively [1] - However, the stock fell over 6% in a single day and has dropped 10% over the past five trading days [1] Analyst Rating and Price Target - JPMorgan downgraded Pop Mart's stock rating from Overweight to Neutral and reduced the price target from HK$400 to HK$300 [2] Sales Momentum and Market Sentiment - Despite a solid sales momentum, there are concerns that the stock is priced as if future successes are guaranteed, making it vulnerable to any negative news or performance misses [2][4] Key Catalysts and Future Uncertainty - Four out of seven key catalysts have been met, but the success of remaining initiatives, such as the "Labubu & Friends" animation series and new product launches, is uncertain [3] Near-term Risks - There are increasing concerns regarding product quality and design, with negative media reports affecting resale prices after rapid production expansion [4] - The company is trading at high multiples, with a 2025 P/E of 31 and a 2026 P/E of 22, indicating limited room for error [4] Long-term Strategy - Pop Mart's long-term strategy remains strong, with over 100 intellectual properties, 500 retail stores, and thousands of automated "roboshops" across more than 30 countries [5] - It is expected that overseas markets will contribute over 60% of earnings by 2027, with Labubu accounting for 35% of sales [5] Potential Upside Surprises - Possible positive developments include stronger Mini Labubu sales, successful cross-selling from the upcoming animation, and endorsements from global celebrities [6] - Accelerated licensing deals with international brands could also enhance the franchise's growth potential [6]