Labubu's are nearly 'over' says expert — here's the next hit toy
Labubu dolls. Picture: Pop Mart
If you've been to a night market or vape store then you've probably seen Labubu dolls — they're a line of cute, collectible monster plush toys that can be hung from a handbag. And if you're Gen Z you very likely have bought into the craze with the latest in these collectibles bought online.
But the trend maybe already dying say experts.
The euphoria surrounding Pop Mart International Group Ltd’s Labubu toys is starting to resemble the boom-and-bust cycle that ended in the collapse of Beanie Babies in the 1990s, according to one analyst.
The hype over the sharp-fanged monster dolls is about to peak says 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, Hu says.
So if you're buying up genuine Labubu toys in the hope of making a profit then you might need to reconsider your investments she warns.
“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.
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 October 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.
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 intellectual properties popularity and fund overseas expansion.
Bullish analysts point to a range of positives including Pop Mart’s early stage of global penetration and efforts to diversify its product range.
“We think the market has underestimated Pop Mart’s proactive measures in driving IP popularity,” Morgan Stanley analysts including Dustin Wei in Hong Kong wrote in a note published this week. Beyond new product launches, its engagement in entertainment — such as theme parks, movies, and celebrity collaboration — are effective measures to sustain its IP lifecycle.”
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 sceptical 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.
* The brand’s extraordinary success has led to a flood of unauthorised dolls entering the market – online, in street stalls, and even in retail shops. Unauthenticated dolls — sometimes referred to colloquially as ‘Lafufus’ — may be poorly made, with loose parts posing a choking hazard. They may also contain unsafe paints, plastics or dyes. When in doubt, always buy from official or reputable sellers.
* There isn’t a dedicated Pop Mart store in Ireland but you can find them in select shops. Genuine Labubus are also available online directly from Pop Mart. When you buy from businesses based in Ireland or the EU you have strong consumer rights. But if you purchase from a private seller or from a shop outside Ireland and the EU, your consumer rights may not be protected if something goes wrong.
— Bloomberg
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