Pop Mart’s Rollercoaster Ride: What Investors Must Know About the Labubu Craze and Regulatory Headwinds
Pop Mart, the Chinese toymaker behind the wildly popular Labubu collectible figures, has been the darling of investors in 2025 — but recent developments signal a pivotal moment that savvy investors cannot afford to overlook.
The Rise and Recent Slide of Pop Mart Shares
Pop Mart’s shares soared over 160% year-to-date, fueled by the explosive popularity of its “blind box” collectibles. These unmarked boxes, priced between $5 and $10, offer buyers a chance to get rare figurines, turning collecting into a speculative frenzy. The Labubu series, featuring an elf-like character, has become a global sensation, even catching the eye of major publications like The New York Times and New York Magazine.
However, the stock has faced a sharp correction recently, dropping over 13% in a week — its first negative streak since early May. Morgan Stanley’s decision to remove Pop Mart from its China and Hong Kong focus list, replacing it with insurer PICC P&C, underscores growing investor caution. Despite raising Pop Mart’s price target to HKD 302 ($38.47) just days earlier, Morgan Stanley flagged concerns about the sustainability of its rapid growth and lofty valuation.
Regulatory Clouds and Market Sentiment
The Chinese government’s increasing scrutiny of the “blind box” phenomenon adds a layer of uncertainty. The People’s Daily, the official mouthpiece of the Chinese Communist Party, called for stricter regulation of such toys, citing concerns about excessive spending by children and young people. While Pop Mart was not named explicitly, the message was clear: the government is wary of speculative consumption behaviors that could lead to financial risks for younger demographics.
Additionally, China’s customs agency has actively clamped down on counterfeit Labubu products, signaling a broader crackdown on intellectual property and product authenticity. These regulatory signals have rattled investors, contributing to the recent sell-off.
What This Means for Investors and Advisors
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Valuation Vigilance: Pop Mart’s meteoric rise has priced in expectations of continued exponential growth. Yet, as Morgan Stanley’s analysis suggests, the market may be overestimating near-term potential. Investors should be cautious about chasing momentum in stocks vulnerable to regulatory intervention.
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Regulatory Risk is Real: The Chinese government’s focus on consumer protection and financial prudence among youth is a trend that will likely extend beyond blind boxes to other speculative consumer products. Investors must factor in regulatory risk when evaluating Chinese consumer stocks, especially those with a “gamified” or speculative element.
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Diversification and Sector Rotation: With Morgan Stanley shifting focus from Pop Mart to PICC P&C, a major insurer, investors might consider rotating some exposure into sectors seen as more stable or aligned with government priorities, such as insurance and financial services.
- Global Expansion as a Growth Lever: Pop Mart’s overseas sales in 2024 already surpassed its total sales in 2021, highlighting successful international expansion. This diversification could partially mitigate domestic regulatory pressures. Investors should watch how well Pop Mart leverages its global footprint, especially in markets less prone to such regulatory crackdowns.
Unique Insight: The Adult Toy Market’s Untapped Potential
A trend often overlooked is the growing demand for collectible toys among adults, not just children. Pop Mart’s success taps into this “adult toy” market, which is expanding globally. According to a recent report by Grand View Research, the global collectible toys market is projected to grow at a CAGR of over 7% through 2030, driven largely by adult collectors. This demographic shift could provide Pop Mart and similar companies with a more resilient customer base less susceptible to regulatory crackdowns aimed at protecting minors.
What’s Next?
- Watch for Regulatory Updates: Investors should monitor China’s policy announcements closely. Any new rules limiting sales or marketing of blind box toys could further pressure Pop Mart’s stock.
- Evaluate Earnings Reports for Overseas Growth: Upcoming earnings will reveal how well Pop Mart is capitalizing on international markets, a key growth driver.
- Consider Valuation Adjustments: Given the recent volatility, reassess entry points and consider partial profit-taking for those already invested.
- Explore Adjacent Opportunities: The adult collectibles trend opens doors for investment in other companies with exposure to this niche, such as specialty retailers or online platforms.
Final Takeaway
Pop Mart’s story is a microcosm of the broader dynamics shaping Chinese consumer stocks in 2025: rapid growth fueled by innovative products and cultural trends, tempered by rising regulatory scrutiny. For investors, the key lies in balancing excitement about growth with prudent risk management and a keen eye on policy shifts. The “blind box” craze may have dimmed for now, but the underlying trends driving collectible toys and adult consumer demand remain compelling — if approached with discipline and insight.
Sources:
- Morgan Stanley Equity Research, June 2025
- People’s Daily, June 2025
- Grand View Research, Collectible Toys Market Report, 2024
- CNBC interviews with industry experts, June 2025
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Source: Labubu-maker Pop Mart shares fall as Morgan Stanley cuts it from list