Pop Mart Shares Decline Following Morgan Stanley's Focus List Removal

BEIJING — Pop Mart International Holdings Limited, the Chinese toy company renowned for its 'Labubu' collectibles, witnessed a significant decline in its stock price this week. The drop follows Morgan Stanley's decision to remove Pop Mart from its focus list, which has been a critical indicator of investment confidence. Shares in the Hong Kong-listed company fell over 5% on Friday, extending a decline that began earlier in the week when the stock had already slumped by 5.3%. This downturn positions Pop Mart on track for its first negative week since early May, accumulating losses of more than 13% and reducing its year-to-date gains from over 160% to a more modest figure.

According to a note published by Morgan Stanley on June 19, 2025, the investment bank has replaced Pop Mart with PICC Property and Casualty Company in its focus list for China and Hong Kong. While the bank did not provide specific reasons for this change, equity analyst Dustin Wei remarked that the market may have already fully accounted for Pop Mart's rapid growth in 2025, expressing doubts about the sustainability of its long-term performance, especially in light of its high valuation.

The decline in Pop Mart's stock is compounded by recent criticisms from Chinese state media regarding the company's 'blind box' toy phenomenon. People's Daily, the official newspaper of the Chinese Communist Party, called for stricter regulations surrounding blind box sales, which have gained notoriety for enticing consumers, particularly children and young adults, to spend significantly on unmarked toy boxes. The report did not mention Pop Mart directly but highlighted concerns over the speculative nature of such purchases.

In addition, China's customs agency has been active in addressing issues related to counterfeit 'Labubu' toys, further complicating Pop Mart's market position. The company's shares reached a record intra-day high of 283.40 HKD on June 12, following a price target increase from Morgan Stanley, which had raised its estimate to 302 HKD ($38.47) just prior to the stock's decline.

The Labubu series, featuring an elf-like character, has recently become a cultural phenomenon, attracting attention from major publications such as New York Magazine and The New York Times. Additionally, the company has expanded its merchandise offerings with various Labubu-themed products, including plush toys and pillows. A notable auction earlier this month saw a four-foot-tall Labubu figurine sell for approximately $170,000, underscoring the collectible's appeal.

Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, which assists international brands in penetrating the Asian market, suggested that Pop Mart's success reflects a growing trend in adult toy collections. He noted that the company’s overseas sales have already surpassed its total sales for 2021, with 2024 figures reportedly reaching 5.1 billion yuan ($624.6 million) in overseas sales, a staggering increase of 373% from the previous year. Domestic sales have also seen a significant rise, climbing to 7.97 billion yuan.

As Pop Mart navigates these challenges, the implications for its future growth remain uncertain. The company's ability to adapt to regulatory pressures and maintain consumer interest in its products will be crucial as it seeks to stabilize its stock performance and sustain its momentum in both domestic and international markets. The current situation highlights the volatility of the toy industry amid shifting consumer behaviors and regulatory scrutiny, raising questions about the long-term viability of the blind box trend in China and beyond.