The market places too much emphasis on the so-called

# Source: Wall Street Insights

By Bao Yilong

Morgan Stanley points out that investors are overly reliant on unsubstantiated North American credit card consumption data, while ignoring Pop Mart’s strong growth momentum in the Chinese and Asian markets as well as the rapid expansion of non-Labubu IP products. The brokerage forecasts the company’s earnings will grow by 21% in 2026. If Pop Mart can achieve a sequential quarterly growth of approximately 10%, its sales will hit Morgan Stanley’s most optimistic projection—60 billion yuan in revenue and 19.8 billion yuan in net profit.

Morgan Stanley believes the market is excessively focused on Pop Mart’s high-frequency sales data in North America, seriously undervaluing the company’s intrinsic value.

According to news from Zhuifeng Trading Desk, on January 5, Morgan Stanley’s research team led by Dustin Wei released a report, stating that the market’s pessimistic expectations for Pop Mart’s North American business are significantly biased. Investors are overly dependent on unverifiable credit card consumption data, while overlooking the company’s robust growth drivers in China and Asian markets.

Based on credit card data, the market estimates Pop Mart’s North American sales in 2025 to be as low as 6 billion yuan, whereas Morgan Stanley projects the figure at 7.1 billion yuan. More importantly, the report argues that investors are paying too much attention to the North American market and the single Labubu IP, while ignoring the company’s solid fundamentals in China and the Asia-Pacific region and the fast growth of non-Labubu IP products.

Morgan Stanley forecasts the company’s earnings will grow by 21% in 2026. If Pop Mart can achieve a sequential quarterly growth of around 10%, its sales will reach Morgan Stanley’s most bullish target—60 billion yuan in revenue and 19.8 billion yuan in net profit, implying an expected earnings growth of 45-50%. Once Pop Mart starts to demonstrate clear sequential growth, its stock price will respond positively.

## North American Sales Expectations May Be Too Low

Widely circulated credit card consumption data indicates that Pop Mart’s North American sales in 2025 will be at a low level of around 6 billion yuan.

The data shows that North American sales in Q4 2025 dropped by 25-30% from Q3, and the market has extrapolated this trend into 2026, pricing in a sales decline in the North American market.

However, Morgan Stanley’s analysis projects Pop Mart’s North American sales in 2025 at 7.1 billion yuan, with Q4 sales roughly on par with Q3.

Morgan Stanley expects online sales to decline sequentially in Q4, while offline sales will register significant sequential growth. Analysts believe that driven by increased supply and more new product launches, non-Labubu products became a stronger growth driver in Q4.

Morgan Stanley estimates that the average annual sales per square meter of Pop Mart’s North American stores will reach 45-50 million yuan, with the second half of the year outperforming the first half. This means new stores can recoup their investment within 1-2 months, far faster than most U.S. retail businesses, indicating extremely strong demand.

## Online for Blockbusters, Offline for Loyal Fans; Future Advantages Focus on Asia-Pacific

In the first half of the year, online sales accounted for approximately 60% of Pop Mart’s North American revenue, and the proportion further rose to 60-70% in Q3, driven by Labubu pre-sales.

The report points out that the IP distribution of offline sales is far more diversified than that of online channels. In the trendy toy sector, physical products have stronger visual appeal than online browsing. Consumers spend more time in stores, increasing opportunities for new IP discovery and cross-selling.

Furthermore, Pop Mart’s experience in China and the Asia-Pacific region shows that physical stores are the foundation for cultivating repeat customers, a consumer group with more stable purchasing behavior than social media-driven internet trend followers.

From a broader perspective, analysts believe the market is overemphasizing the North American market while ignoring Pop Mart’s advantages in China and the Asia-Pacific region.

The company has established strong consumer engagement and brand equity in these regions. Increased supply of popular products and the launch of new IPs/designs have received positive consumer feedback, driving sustained robust business growth.

Morgan Stanley argues that the group’s overall earnings momentum in 2026 will become a stronger stock price driver than the North American market or the Labubu IP.

## New Year Growth Data and IP Diversification Strategy Will Boost Expectations

Morgan Stanley believes the market has overlooked the fact that Pop Mart sold mostly older Labubu plush toys in the second half of 2025, and will launch more new products in 2026.

In addition, 2025 marked the first year Pop Mart gained popularity in the U.S., and more growth initiatives will be rolled out in the future to develop IPs and attract consumers.

The report notes that the resumption of sequential growth and more evidence of IP diversification are two key catalysts for improving market sentiment.

The report points out that Pop Mart’s sales grew sequentially by approximately 50% in both Q2 and Q3 2025, setting an extremely high base. Therefore, the slowdown in sequential growth from Q4 2025 to Q1 2026 is a normal phenomenon. Morgan Stanley expects sequential growth to accelerate in Q2 and Q3 2026, driven by continuous store openings, new customer acquisition and new product launches, which will then lift market expectations for 2027.

If Pop Mart can achieve solid sequential growth of 5-10% in Q1 with a balanced regional structure, Morgan Stanley notes that the current 2026 sales forecast (48 billion yuan, up 26% year-on-year) may be conservative.

In terms of IP diversification, the market will increasingly recognize the strength of non-Labubu IPs in 2026. The company states that its top five best-selling IPs rank among the top five in all four regions. However, in the long run, Morgan Stanley believes IP preferences will vary across different regions.

For example, the market scale of Twinkle Twinkle in China will exceed 50% of Labubu’s in 2026. In addition, Hirono, Hacipupu and Nyota have gained more attention in overseas markets than in China.

## Long-Term Investment Thesis: A Global IP Collectibles Platform

The report points out that Pop Mart appears well-positioned to capture the growing global demand for IP products targeting the "kidult" demographic.

Analysts believe Pop Mart is evolving into a global IP collectibles platform, integrating Sanrio’s design-driven IPs, Bandai Namco’s product development capabilities, LEGO’s design-led repeatable product system, and Disney’s experience/media franchise building model.

Moreover, Pop Mart’s business model features light assets and high ROE, enabling it to lead and shape the global kidult trend while achieving long-term high-quality compound growth in returns.

At current valuations, Pop Mart trades at approximately 16 times its 2026 expected price-to-earnings ratio, corresponding to a 21% earnings growth forecast. If the company achieves Morgan Stanley’s most optimistic projection—60 billion yuan in sales in 2026—its valuation will drop to only 12 times, with an earnings growth rate as high as 45-50%.

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The above insightful content is sourced from Zhuifeng Trading Desk.

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