The market overvalues so-called "North American high-frequency data," Morgan Stanley: POP MART is undervalued.

Morgan Stanley believes the market is overly focused on high-frequency sales data of Pop Mart's North American market, seriously underestimating the company's true value.

According to Chasing Trend Trading Desk news, on January 5, Morgan Stanley Dustin Wei's research team issued a report, pointing out that there’s a significant deviation in the market’s pessimistic expectations for Pop Mart's North American business. Investors are excessively relying on unverifiable credit card consumption data, while overlooking Pop Mart’s strong growth momentum in China and Asian markets.

Market estimates based on credit card data put Pop Mart’s 2025 North American sales at as low as RMB 6 billion, while Morgan Stanley expects RMB 7.1 billion. More importantly, the report believes investors are overly focused on the North American market and the single Labubu IP, whereas the company currently enjoys strong fundamentals in China and Asia-Pacific, and rapid growth from non-Labubu IP products.

Morgan Stanley estimates 2026 profit growth will reach 21%. If the company achieves about 10% quarter-on-quarter growth each quarter, sales will reach Morgan Stanley’s most optimistic forecast—RMB 60 billion sales and RMB 19.8 billion net profit, meaning an expected profit growth of 45-50%. Once Pop Mart starts to show clear quarter-on-quarter growth, the stock price will react positively.

North American Sales Expectations May Be Too Low

Widely circulated credit card consumption data show Pop Mart's 2025 North American sales at only around RMB 6 billion.

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

But Morgan Stanley’s analysis projects Pop Mart’s 2025 North American sales at RMB 7.1 billion, with Q4 sales close to Q3.

Morgan Stanley expects online sales to decline quarter-on-quarter in Q4, but offline sales will increase significantly. Analysts believe that, thanks to increased supply and more new product launches, non-Labubu products will become a stronger driver in Q4.

Morgan Stanley estimates the average annual store efficiency in 2025 for North American stores will be RMB 45 to 50 million per store, higher in the second half than the first half. This means new stores can recoup investments in only 1-2 months—far faster than most US retail businesses, indicating extremely strong demand.

Online Sales Hit Blockbusters, Offline Builds Loyal Fans, Future Focuses on Asia-Pacific

In North America, Pop Mart's online sales ratio was about 60% in H1, and rose to 60-70% in Q3 driven by Labubu pre-sales.

The report points out that IP distribution in offline sales is much more diversified than online channels. In the trendy toy field, the visual appeal of physical products outperforms online browsing. Consumers stay longer in stores, increasing opportunities for exploring new IPs and cross-selling.

Additionally, Pop Mart’s experience in China and Asia-Pacific shows that physical stores are the foundation for cultivating repeat customers; this consumer group’s buying behavior is more stable than internet trend followers influenced by social media.

On a larger scale, analysts believe the market is overly emphasizing the North American market while neglecting Pop Mart’s advantages in China and Asia-Pacific.

The company has built strong consumer engagement and brand equity in these regions. Increased supply of popular products and the launch of new IPs/designs have received strong consumer response, driving sustained strong business performance.

Morgan Stanley believes the group’s overall profit momentum in 2026 will be a stronger stock price driver than the North American market or Labubu.

New Year Growth Data and IP Diversification Strategy Will Lift Expectations

Morgan Stanley believes the market is ignoring that Pop Mart will sell old Labubu plush toys in the second half of 2025, with more new products coming in 2026.

Additionally, 2025 is Pop Mart’s breakthrough year in the US, and there will be more growth initiatives to develop IPs and attract consumers in the future.

The report states that more evidence of resumed quarter-on-quarter growth and IP diversification are two important catalysts for improved market sentiment.

The report notes company sales grew sequentially by about 50% in both Q2 and Q3 of 2025, resulting in a very high base. Therefore, slower growth from Q4 2025 to Q1 2026 is normal. Morgan Stanley expects accelerated sequential growth in Q2 and Q3 2026, driven by continued store openings, new customer acquisition, and new product launches, which will boost market forecasts for 2027.

If Pop Mart achieves 5-10% solid sequential growth in Q1 and maintains balanced regional structure, Morgan Stanley points out its forecast for 2026 sales (RMB 48 billion, up 26% YoY) may be conservative.

On IP diversification, the market in 2026 will increasingly recognize the strength of non-Labubu IPs. The company says its top five group IPs are among the top five in all four regions. In the long-term, Morgan Stanley believes there will be regional differences in IP preferences.

For example, Twinkle Twinkle’s scale in China in 2026 will be 50% larger than Labubu’s. Furthermore, Hirono, Hacipupu, and Nyota receive more attention in overseas markets than in China.

Long-term Investment Logic: The Global IP Collectibles Platform

The report indicates Pop Mart seems ready to capture the global growing demand for “kidult” IP products.

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

In addition, Pop Mart’s asset-light business model and high ROE allow it to lead and shape the global kidult trend while achieving long-term high-quality compound returns.

At current valuation, Pop Mart trades at around 16x 2026 PE, corresponding to 21% profit growth expectations. If the company hits Morgan Stanley’s most optimistic target—RMB 60 billion sales in 2026—the valuation drops to only 12x, with profit growth up to 45-50%.

~~~~~~~~~~~~~~~~~~~~~~~~

The above excellent content comes from Chasing Trend Trading Desk.

For more detailed interpretations, including real-time insights and frontline research, please join [Chasing Trend Trading Desk · Annual Membership]

Risk Warning and DisclaimerThe market involves risks, investment should be cautious. This article does not constitute personal investment advice, nor does it take into account individual users’ specific investment objectives, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Investing based on this is at your own risk.