Pop Mart's Market Value Sheds $13 Billion; Stock Declines Post Hang Seng Inclusion, Morgan Stanley Downgrades

TradingKey - On Monday, September 15, Pop Mart's shares (9992.HK) continued their downward trajectory, plunging nearly 9% during morning trading to HKD 252—the lowest since August 5 and marking the steepest drop since April this year. The shares eventually closed down 6.43% at HKD 259, following a downgrade in both rating and target price by Morgan Stanley.

Morgan Stanley adjusted the stock's rating from "Overweight" to "Neutral" and slashed the target price from HKD 400 to HKD 300. The firm cited a lack of clear growth catalysts and an unattractive current valuation as key reasons for the downgrade.

Morgan Stanley noted that the stock had surged 209% year-to-date and 466% over the past year, significantly outperforming the Hang Seng Index's gains of 32% and 52%, respectively, during the same periods. The current valuation, according to Morgan Stanley, already factors in perfect expectations for the stock, and any fundamental shortcomings or negative news could trigger a price correction. In short, near-term risks outweigh potential rewards.

Moreover, Morgan Stanley pointed out that the recent rally was driven by a series of catalysts that have already materialized, such as stellar performance in the first half of 2025, successful collaborations with Uniqlo, inclusion in the Hang Seng Index, and the opening of POPOP jewelry stores.

However, Morgan Stanley expressed uncertainty about the realization of three other potential catalysts: the release of Season 1 of the "Labubu & Friends" animation (delayed from summer), the launch of Labubu 4.0 around Christmas or the Lunar New Year, and the introduction of interactive toys.

In light of these factors, Morgan Stanley recommended that investors delay their decision-making until Q4 2025 to Q1 2026, when the next catalyst window may open, providing a basis for investment decisions.

Despite the downgrade in rating and target price, Morgan Stanley remains optimistic about Pop Mart's long-term investment potential. The firm identifies three pillars for the company's long-term success: a mature ability to monetize intellectual property (IP), a diversified IP portfolio, and successful global expansion.

Compared to its peak closing price of HKD 335.4 on August 26, the current share price has dropped nearly a quarter, resulting in a market value loss of $13 billion.