When growth can no longer justify valuation, a success story must be rewritten. Following the release of its second-half 2025 earnings, POP MART's stock plummeted over 22% in a single day. Three major investment banks—Goldman Sachs, Morgan Stanley, and UBS—simultaneously lowered their profit forecasts and target prices for the company, signaling a market reassessment of the "high-growth" narrative surrounding the creator of Labubu.

According to the latest financial report, POP MART's revenue for the second half of 2025 increased 174% year-over-year to RMB 23.2 billion, while net profit grew 272% to RMB 8.2 billion. However, both figures fell short of Goldman Sachs' estimates by 8% and 10%, respectively.

The primary source of the earnings miss was the overseas market. Growth in the Americas region slowed sharply from over 1,265% in the third quarter to 633% in the second half, while Europe and other regions decelerated from over 735% to 436%, both significantly below expectations. As a result, the stock declined approximately 22% to 23% on March 25, even as the Hang Seng Index rose 1%.

The three investment banks quickly responded. Goldman Sachs cut its profit forecasts for 2026–2027 by 18% and slashed its 12-month target price from HK$300 to HK$184, while maintaining a Neutral rating. Morgan Stanley reduced its 2026–2027 revenue forecast by 4–5% and net profit forecast by about 4%, lowering its target price from HK$325 to HK$278. However, it retained an Overweight rating and kept the stock on its Top Picks list. UBS trimmed its adjusted net profit forecast for 2026–2028 by 7–13% and adjusted its target price from HK$326 to HK$278, while keeping a Buy rating.

The consensus among the three institutions is that the overseas expansion engine is cooling, which may increase near-term stock volatility, but the long-term value of POP MART's IP ecosystem continues to support its fundamentals. The central debate in the market is whether the slowdown is a temporary result of operational adjustments or a sign that Labubu's peak popularity has passed, marking a turning point in the IP cycle.

Overseas performance fell short across the board. In the second half of 2025, POP MART's total sales reached RMB 23.244 billion, up 174% year-over-year, while net profit rose 272% to RMB 8.201 billion. While these figures remain impressive, they fell short of Goldman Sachs' expectations by roughly 8–10%.

Regionally, Greater China (including mainland China, Hong Kong, Macau, and Taiwan) outperformed expectations, growing 134% year-over-year, about 5% above Goldman's forecast. The Asia-Pacific region grew 123%, largely in line with estimates. However, the two key overseas markets disappointed:

- Americas: Growth of 633% year-over-year, though still high, represented a sharp deceleration from the 1,265–1,270% growth seen in the third quarter and fell about 14% below expectations. - Europe and other regions: Growth of 436% slowed significantly from the 735–740% pace in the third quarter and missed expectations by 66%.

Actual overseas sales totaled RMB 10.675 billion, compared to Goldman Sachs' forecast of RMB 13.231 billion—a gap of 19.3%. The net profit shortfall was also partly due to foreign exchange losses.

Goldman Sachs noted in investor communications that the market reaction reflects concerns over slowing growth, particularly in the U.S., where third-party data indicates further deceleration year-to-date, alongside IP and product cycle risks. Morgan Stanley also pointed to third-party data showing continued softening in U.S. growth as a key factor driving negative investor sentiment.

Despite reacting to the same disappointing results, the three banks diverged in the extent of their adjustments and their rating stances.

Goldman Sachs made the most significant revisions. Analyst Michelle Cheng’s team cut 2026–2027 profit forecasts by 18%, citing three factors: downward pressure on new product prices in the U.S. due to tariff reductions, margin pressure from high raw material costs, and reduced operating leverage from slower overseas expansion. Valuationally, Goldman lowered its target P/E multiple from 20x to 15x, benchmarking it below Disney's 10-year historical average by one standard deviation. Its 12-month target price was cut sharply from HK$300 to HK$184, offering only about 9.3% upside from the current price of HK$168.3, with a Neutral rating maintained.

Morgan Stanley adopted a more optimistic stance. Analyst Dustin Wei’s team lowered 2026–2027 profit forecasts by about 4% and reduced the target price from HK$325 to HK$278. The target P/E multiple was cut from 26x to 23x (implying a PEG ratio of about 1.3x based on a 22% EPS CAGR from 2025–2027). Still, the bank maintained an Overweight rating and kept POP MART on its Top Picks list, arguing that the current ~14x 2026 forward P/E is undervalued and that the company continues to gain share in a growing global IP collectibles market. It also suggested that operational adjustments in 2026 could enhance competitiveness by 2027–2028.

UBS’s adjustments were relatively moderate. The bank lowered its adjusted net profit forecast for 2026–2028 by 7–13%, with larger cuts applied to overseas projections, though domestic estimates were raised. Its target price was trimmed from HK$326 to HK$278, but the Buy rating was kept intact, citing attractive current valuations.

The three banks also showed some divergence in their 2026 revenue forecasts: Goldman expects RMB 44.9 billion (up ~21% year-over-year), Morgan Stanley projects RMB 45.9 billion (up ~24%), and UBS anticipates around RMB 45 billion (up ~21%).

While collectively lowering forecasts, the three institutions displayed clear differences in their medium- to long-term outlooks, reflecting deeper market tensions. Goldman anchored its valuation to Disney’s historical multiples, arguing that slowing growth warrants a lower multiple and that near-term IP/product cycle uncertainties limit the risk-reward appeal of an Overweight position. Morgan Stanley stood by the long-term narrative of global IP market share gains, likening POP MART to an early-stage combination of Sanrio, Bandai, Lego, and Disney, and viewing current valuations as undervalued. UBS maintained a Buy based on fundamental growth prospects, highlighting resilience in the Chinese market.

Management has positioned 2026 as a year of consolidation and prudent expansion. In the earnings call, executives struck a cautious tone, describing 2026 as a "year of operational consolidation and organizational optimization." After significantly exceeding expectations with high growth in 2025, the company intends to slow down to build a more sustainable foundation.

For core guidance, POP MART set a 2026 revenue growth target of no less than 20%, while pledging not to sacrifice profitability. Specific gross margin guidance was postponed until the May quarterly business update, citing uncertainties in raw material and logistics costs. The company also announced new quarterly business updates in May and November to enhance transparency.

Morgan Stanley highlighted in its report that management has proactively delayed the launch of the Labubu 4.0 series and the opening of New York flagship stores (Times Square and Fifth Avenue), suggesting that the relatively conservative 2026 target reflects deliberate pacing rather than purely softening demand.

Operationally, the domestic focus will shift toward store renovations, with more stores slated for upgrades than in 2025, alongside the opening of several new flagship locations. Management noted that stores upgraded in 2025 saw sales per store double and floor space increase by 30–50%.

Overseas, POP MART plans to exceed 100 U.S. stores in 2026 while expanding into lower-tier cities, tourist destinations (such as Pattaya and Bali), and international hub airports (like Narita and Doha). Notably, overseas online sales exceeded offline store sales for the first time in 2025. Management attributed the high online share in the U.S. partly to operational challenges in physical retail, expecting offline contribution to gradually recover over the long term, though online is likely to remain dominant in 2026.