Pop Mart’s Labubu boom draws Beanie Babies comparison as analyst warns of peak hype

The euphoria surrounding Labubu toys is starting to resemble the boom-and-bust cycle that ended in the collapse of Beanie Babies in the 1990s, a warning sign for investors, a bearish analyst says.

The hype over the sharp-fanged monster dolls is about to peak, and doubts about the next sales driver for owner Pop Mart International Group Ltd. suggest its shares have limited upside, said Melinda Hu, a senior research analyst for Asia consumer stocks at Bernstein in Hong Kong.

“The scarcity, the hunt, the dopamine hit and the secondary market” fueling Labubu’s popularity resembles the speculative cycle of Beanie Babies, said Hu, who’s the only analyst to currently have a sell rating on Pop Mart. “I wouldn’t advise long-term investors to add the shares without fundamental changes” in the company’s strategy, she said.

The golden era of Pop Mart shares may already be over. The company’s Hong Kong-listed stock has dropped more than 30% from its high in August, with some of the losses taking place after an employee was heard questioning the price of one of its blind-box products during a live-streaming event. The pullback has come after a rally that saw shares surge more than 1,500% from the start of last year to their August high.

No fewer than 42 of the 46 analysts covering Pop Mart still have a “buy” or equivalent rating on Pop Mart, and three others label it a “hold,” according to data compiled by Bloomberg. The shares have fallen about 25% since Hu initiated her coverage of the Beijing-based toy firm with an “underperform” rating on Oct. 16.

Hu, who has worked at Bernstein for about seven years, currently covers 10 companies including ANTA Sports Products Ltd. and Shiseido Co. Investors who followed her recommendations would have made an average loss of 5% over the past six months, compared with an average decline of 2.7% for her peer analysts, data compiled by Bloomberg show.

Trader positioning shows rising doubts over Pop Mart’s near-term performance. So-called short interest in the stock as a percentage of its total free float climbed to 2.8% as of Thursday, the highest level since April 2024, according to data from S&P Global Inc.

Beanie Babies, a range of animal-shaped plush toys stuffed with plastic pellets, boomed in value during the late 1990s until they came to be considered a financial investment. The bubble burst around 1999 and the toys, created by unlisted company TY Inc., are now mostly worthless.

Pop Mart shares slumped more than 9% on Oct. 23 when the company’s third-quarter results beat forecasts but failed to allay concern that growth will slow into 2026. The firm’s dependence on Labubu has been a growing cause of investor unease, with the “Monsters” product series that includes the character accounting for about 35% of total revenue in the first half, up from just 14% a year earlier.

“The bull–bear debate boils down to one question: can the company break free from Labubu dependency and spark growth through other IPs?” Bernstein’s Hu said, referring to intellectual properties.

Revenue Growth

Bernstein estimates that Pop Mart’s annual revenue growth will peak at 145% this year, and margins will gradually fall from current levels as marketing expenses increase to maintain IP popularity and fund overseas expansion.

While the decline in Pop Mart shares has already pushed them below Hu’s one-year price target of HK$225, she has so far refrained from changing that number, calling it a long-term view.

Bullish analysts point to a range of positives including Pop Mart’s early stage of global penetration and efforts to diversify its product range.

Pop Mart also has at least one viable alternative to Labubu, according to JPMorgan Chase & Co.

“Twinkle Twinkle is attracting an authentic fan base instead of being an alternative when consumers cannot get Labubu,” analyst Kevin Yin wrote in a research note last month. The star-themed toy line will contribute 8% of Pop Mart’s sales by 2027, up from 2.8% in the first half of this year, he said.

Hu is unconvinced. “I’ve yet to see proof that the other IPs can independently generate stand-alone interest,” she said. “There is limited visibility into Pop Mart’s long-term growth sustainability.”

The Bernstein analyst is also skeptical about the view that Labubu can build a sustainable long-term popularity similar to Sanrio Co.’s Hello Kitty and Mattel Inc.’s Barbie dolls.

With Hello Kitty and Barbie, “there’s no speculative marketing, no scarcity, no blind box mechanics, and no dopamine-driven purchasing,” Hu said. The products are constantly available and easy to reach for all consumers, a key for their long-term stable growth, she said.