POP MART plummets, Morgan Stanley "supports": "Second-hand market prices" may be misleading

With the price of LABUBU plummeting in the second-hand market, POP MART's stock price has recently suffered a sharp decline. However, Morgan Stanley remains optimistic, believing that the market may be overreacting to a single high-frequency data point, and that the price fluctuations in the second-hand market may be misleading signals.

On September 8, POP MART's stock price fell by 7.5%, closing below HKD 300. Behind this stock price volatility is the "avalanche" of prices for its popular LABUBU series in the secondary market. The hidden version blind boxes, which were once speculated to over ten thousand yuan, have now seen their prices halved, leading to a rapid cooling of the overall trend toy speculation frenzy.

According to Chasing Wind Trading Desk, in the face of market panic, Morgan Stanley chose to "support" POP MART in its latest report. Analysts Dustin Wei and others pointed out in the report that the current stock price fluctuations are more driven by technical and emotional factors rather than a deterioration in fundamentals.

Morgan Stanley's core view is that the prices in the second-hand market do not effectively reflect the true supply and demand situation. The report emphasizes that the secondary market accounts for only a small portion of total supply and demand, especially against the backdrop of POP MART actively increasing production capacity and cracking down on "scalper" speculation; overly relying on this indicator may lead to misleading conclusions. The firm believes that with the diversification of POP MART's IP matrix and expansion into overseas markets, its long-term growth prospects remain strong.

LABUBU Second-Hand Market "Plunge"

The reversal of market sentiment stems from the sharp decline in prices of POP MART's popular IP.

Data shows that the mini LABUBU series, released on August 28, saw its hidden versions once speculated to nearly a thousand yuan on the night of release, with the overall second-hand price generally between 1500 yuan and 3200 yuan. However, this booming market lasted only a week before prices began to decline continuously.

According to data from trend toy trading platforms, shortly after the release, the second-hand price of the fourth generation LABUBU overall dropped to between 1400 yuan and 1850 yuan, with some unpopular styles even falling below the official price of 79 yuan.

This price "avalanche" has also spread to older series, with the transaction price of the third generation LABUBU overall dropping from a high recovery price of 1380 yuan in June this year to the current range of 600 yuan to 700 yuan.

The drastic price fluctuations have led some "scalpers" to post announcements of "suspending purchases," waiting for the market to recover, while speculators who previously invested tens of thousands of yuan in stockpiling face pressure from losses.

Morgan Stanley: Second-Hand Market is Not an Effective Indicator, Technical Sell-Off Leads to Stock Price Decline

Morgan Stanley believes that although second-hand market prices are the only high-frequency data that can be easily tracked, they may be "misleading."

Morgan Stanley pointed out that the second-hand market accounts for only a small portion of total supply and demand. More importantly, POP MART has been actively increasing its supply capacity and cracking down on scalpers, and these measures themselves will compress the premium space in the second-hand market.

The report also mentioned that this is the third time the market has felt concerned due to the second-hand prices of Labubu, indicating that this may be a recurring overreaction Morgan Stanley observed in its report that POP MART triggered a large-scale short covering before being included in the Hang Seng Index. Data shows that 6.3 million shares were shorted last Friday, accounting for 31% of the day's trading volume.

Growth Drivers Beyond Labubu

Morgan Stanley maintains an "Overweight" rating on POP MART and lists it as a "Top Pick." The firm believes that with a current valuation trading at 24 times the expected 2026 price-to-earnings ratio, POP MART offers opportunities for investors, as its strong IP matrix and global expansion potential remain unchanged.

Morgan Stanley acknowledges that Labubu is a key growth driver but emphasizes that it is not the only popular IP for the company. Data indicates that in the first half of 2025, Labubu contributed 35% of sales, while other core IPs such as Molly, Skullpanda, Dimoo, and Crybaby collectively also contributed 35% of sales.

The firm also sees strong growth momentum in other IPs. For instance, Crybaby accounted for 9% of sales in the first half of the year, while Twinkle Twinkle accounted for 3%. Morgan Stanley expects the sales mix of these two series to increase, leading to a more diversified revenue structure.

Additionally, Morgan Stanley believes that POP MART's growth approach remains "disciplined and restrained." For example, despite a 117% increase in offline sales in the Greater China region in the first half of the year, the company only net opened 12 new stores. The company even delayed the launch of some LABUBU new products due to supply shortages of existing SKUs. This cautious expansion strategy, along with its direct-to-consumer (DTC) and proprietary IP business model, helps it engage more closely with fans, thereby achieving long-term sustainability for its business and IP