Pop Mart International Group (SEHK:9992) has become a global sensation, propelled by the viral success of its Labubu character. The company’s 2024 financial report reveals a staggering 106.9% year-on-year revenue surge to RMB 13.038 billion ($1.81 billion), with Labubu alone generating RMB 3.041 billion—a 726.6% increase. This meteoric rise has driven a market capitalization exceeding $20 billion, rivaling Western toy giants like Mattel and Hasbro. Yet, as investors weigh the sustainability of this IP-driven model, a critical question emerges: Is Pop Mart’s growth a long-term boom or a precarious bubble?
The Viral Engine: Labubu and the Blind-Box Model
Labubu’s success hinges on a masterclass in consumer psychology. The character’s “ugly-cute” design, combined with scarcity tactics and social media virality, has turned it into a global status symbol. Celebrities like BLACKPINK’s Lisa and Rihanna have amplified its appeal, while TikTok unboxing videos and secondary market resales (some Labubu figures fetching 741% above retail price) have fueled demand.
The blind-box model—where customers purchase products without knowing the variant—has proven a high-margin, repeat-purchase engine. In 2024, blind-box sales accounted for 61.1% of revenue, with gross margins hitting 66.8%. This model’s effectiveness is evident in the first half of 2025, where Labubu-driven revenue surged 668% year-on-year, contributing 35% of total sales.
However, this success is a double-edged sword. Labubu now accounts for 23% of Pop Mart’s revenue, creating a dependency that could backfire if the IP’s popularity wanes. Analysts warn of “IP fatigue,” where consumers lose interest in a single character, leaving the company scrambling to replace its revenue driver.
Sustainable IP Development: A Strategic Shift
To mitigate over-reliance on viral trends, Pop Mart has adopted a disciplined approach to IP development. The company’s Pop Design Centre (PDC) incubates new artists and IPs, while reducing the frequency of new launches from five to six per year to three to four. Established IPs like Molly and Skullpanda coexist with emerging stars like Hirono and Peach Riot, creating a diversified portfolio.
Product lifecycle management is another key strategy. Skullpanda’s “Secret Forest Castle” series, for example, was extended to a two-year lifecycle—far longer than the industry’s typical nine to twelve months—to deepen consumer engagement. This approach aims to balance short-term virality with long-term brand loyalty.
Pop Mart’s expansion into animated films and theme parks also signals a bid to extend IP value beyond physical collectibles. While these ventures won’t generate immediate revenue, they could anchor emotional connections with audiences, ensuring IPs remain relevant for decades.
Valuation Risks: A High-Stakes Gamble
Despite these efforts, Pop Mart’s valuation remains a contentious issue. As of August 2025, the stock trades at a P/E ratio of 111.1x and a P/S ratio of 26.1x—far above the Hong Kong Specialty Retail sector averages of 12.9x and 0.6x. Analysts estimate a fair P/E of 37.3x based on discounted cash flow models, implying the stock is overvalued by approximately 49%.
The company’s high valuation is justified by explosive growth metrics: 185.9% net profit growth in 2024, 66.8% gross margins, and a 1,289% surge in plush toy revenue. Yet, sustaining such growth is unlikely. The blind-box model’s addictive nature has drawn regulatory scrutiny in China and the U.S., with concerns over youth spending habits. A crackdown could erode a significant portion of revenue.
Environmental risks also loom. Rapid production scaling—from 300,000 to 10 million plush units monthly—has raised questions about sustainability. As consumers increasingly prioritize eco-friendly brands, Pop Mart’s lack of public ESG commitments could alienate a key demographic.
The Global Expansion Dilemma
Pop Mart’s aggressive international expansion—41 U.S. stores in H1 2025, with plans to open 100 more—has driven overseas revenue to 38.9% of total sales. While this diversification is a strength, it introduces operational risks. Supply chain bottlenecks, cultural missteps, and rising costs could strain margins.
Moreover, the company’s reliance on automated “Robo Shops” for low-cost expansion may not translate to all markets. In regions with lower smartphone penetration or different retail habits, these machines could underperform, forcing costly adjustments.
Investment Thesis: Balancing Optimism and Caution
For investors, Pop Mart presents a paradox: a high-growth, high-margin business with a valuation that assumes continued dominance in a volatile market. The company’s strengths—innovative IP strategies, global retail agility, and a loyal Gen Z customer base—justify optimism. However, the risks—IP fatigue, regulatory headwinds, and valuation premiums—demand caution.
Key Metrics to Monitor:
1. IP Development Cadence: Can Pop Mart consistently launch IPs with Labubu’s virality?
2. Regulatory Developments: Will blind-box sales face restrictions in key markets?
3. International Revenue Growth: Can the U.S. and Europe sustain their explosive growth rates?
Conclusion: A High-Risk, High-Reward Proposition
Pop Mart’s IP-driven model has redefined the collectibles market, but its long-term viability depends on navigating a minefield of challenges. For investors with a 5–7 year horizon, the company offers a compelling case of innovation-driven growth. However, the current valuation reflects aggressive expectations that may not materialize.
Investment Advice:
– Bullish Case: Buy for exposure to the global collectibles boom, provided the company diversifies its IP portfolio and addresses regulatory risks.
– Bearish Case: Avoid due to overvaluation and reliance on a single IP. Consider hedging with short-term options or sector ETFs.
In the end, Labubu’s bubble or boom hinges on Pop Mart’s ability to evolve from a viral sensation to a sustainable brand. For now, the market remains divided—but the stakes have never been higher.