Shares of Pop Mart International Group Ltd. fell in Hong Kong after analysts at Bernstein warned that the Labubu-maker’s fourth-quarter results could fall short of expectations.
The stock dropped as much as 3.7%, making it the second-worst performer on the Hang Seng China Enterprises Index on Wednesday, while the broader index was up 0.6% at mid-day.
“Multiple independent data sources point to broad-based demand deterioration in both China and overseas markets during October, with weakness intensifying from peak levels in June,” Bernstein analysts, including Melinda Hu, said in a note dated Nov. 11.
They added, “The convergence of weakening transaction data, social media engagement, and search interest across independent sources signals fundamental demand deceleration that cannot simply be dismissed as noise or channel shifts.”
The warning adds to growing concerns over the Beijing-based firm’s long-term sales outlook, particularly regarding the sustainability of the strong demand seen for its Labubu plush toys, despite the company reporting third-quarter sales growth of up to 250% year-on-year.
Profit-taking and doubts about future growth have also triggered a reversal in the rally that previously made Pop Mart one of the hottest stocks in China’s consumer sector. The stock has fallen nearly 40% since hitting a record high in late August, erasing roughly $20 billion in market value.
Bernstein remains the sole brokerage rating the stock as underperform among more than 40 firms covering Pop Mart. The analysts maintained their price target of HK$225, noting that the extent and consistency of declines across multiple metrics in October suggest the fourth-quarter results may disappoint.
