Pop Mart's Earnings Outlook and Share Price Pressure: Navigating Short-Term Volatility Amid Long-Term Growth in China's Experience Economy

The toy and collectible market in China has long been a battleground for innovation, cultural relevance, and financial ambition. Pop Mart International Group Ltd (9992.HK), a dominant player in this space, has captured global attention with its explosive growth and unique business model. However, as of Q3 2025, the company faces a critical juncture: short-term share price volatility driven by valuation concerns and operational risks, juxtaposed with long-term opportunities in China's evolving experience economy. This analysis evaluates Pop Mart's earnings trajectory, short-term pressures, and its positioning in a market poised for transformation.

Short-Term Volatility: Analyst Downgrades and Operational Risks

Pop Mart's first-half 2025 results were nothing short of staggering. Revenue surged 204.4% year-over-year to RMB13.876 billion, while adjusted net profit hit RMB4.709 billion, a 362.8% increase, according to Pop Mart investor relations. These figures underscore the company's dominance in the blind-box and collectible toy sector, fueled by global demand for its IPs like Labubu and MOLLY. Yet, such rapid growth has attracted scrutiny.

JPMorgan recently downgraded Pop Mart to "Neutral," slashing its target price from HKD 400 to HKD 300, citing a valuation that is "priced for perfection" after a 209% year-to-date stock surge in a JPMorgan downgrade. Morgan Stanley echoed similar concerns, noting limited growth catalysts and a deteriorating risk/reward profile, as reported by Futunn. The downgrade follows a 6.43% single-week stock drop in response to regulatory warnings in China over blind-box mechanics, which some officials have labeled as potentially addictive (reported by Futunn).

Inventory management has also emerged as a critical issue. Roughly 43% of seasoned collectors are scaling back purchases due to design fatigue and over-commercialization, according to Futunn. This trend has led to secondary market price declines, as increased supply dilutes the perceived premium of limited-edition releases. Analysts warn that Pop Mart's overreliance on a narrow set of IPs-Labubu alone accounts for over 40% of revenue-poses a significant risk if consumer enthusiasm wanes (per Futunn reporting).

Long-Term Growth: The Rise of China's Experience Economy

Despite these challenges, Pop Mart's long-term prospects remain anchored in the broader transformation of China's consumer landscape. The country's Gen Z demographic, defined as those born between 1995 and 2010, is reshaping economic dynamics through "emotional consumption." This cohort splurges on collectibles, trendy beverages, and hobbyist pursuits while tightening budgets on everyday expenses, according to Bloomberg.

China's experience economy-encompassing entertainment, collectibles, and lifestyle brands-is expanding rapidly. The collectible toy market alone is projected to surpass US $21.5 billion by 2025, growing at a 35% annual rate, according to CNBC. Pop Mart's global expansion into North America, Europe, and Southeast Asia has been a key driver of this growth, with overseas sales in the Americas surging 1,142.3% year-over-year in H1 2025, per Pop Mart investor relations.

The company's strategic focus on IP development further strengthens its position. Collaborations with global brands like Disney and Universal, alongside in-house creations such as Labubu, have positioned Pop Mart as a cultural exporter. Its "ugly-cute" aesthetic, which challenges traditional kawaii norms popularized by Sanrio, has resonated with Western collectors and celebrities like Rihanna and Blackpink's Lisa (noted in the CNBC piece).

Competitive Landscape and Macroeconomic Tailwinds

While Sanrio and other Japanese brands retain a loyal following, local Chinese competitors are gaining traction by integrating cultural elements and offering more affordable price points, as covered by CNBC. Pop Mart's ability to balance global appeal with localized marketing-such as limited-edition collaborations with Chinese artists-gives it a unique edge.

Macroeconomic trends also favor Pop Mart's long-term trajectory. China's Q3 2025 GDP growth of 1.1% quarter-on-quarter exceeded expectations, driven by resilient retail sales and a 37.2% year-on-year surge in electric vehicle sales, according to KPMG. Although domestic consumption remains cautious, the shift toward experience-based spending aligns with Pop Mart's value proposition.

Conclusion: A High-Volatility Play in a High-Growth Sector

Pop Mart's stock is a double-edged sword for investors. In the short term, valuation pressures, regulatory risks, and inventory challenges could continue to weigh on its share price. However, the company's dominance in the experience economy, global IP strategy, and alignment with Gen Z consumer trends position it for long-term success.

For investors with a multi-year horizon, Pop Mart represents a compelling case study in China's economic evolution-from export-driven growth to a consumer-led, experience-oriented economy. Yet, those seeking stability may find the current valuation and operational risks too precarious. As the company navigates this inflection point, its ability to innovate beyond its core IPs and sustain global demand will determine whether it remains a market leader or becomes a cautionary tale of overvaluation.