JPMorgan downgraded producer Labubu. Shares fell the most since April

Quotes of Chinese Pop Mart, a manufacturer of plush toys Labubu, September 15 showed the sharpest decline in five months. The reason for the sell-off was given by JPMorgan Chase, which withdrew its recommendation to buy its shares. The largest Wall Street bank said that Pop Mart has no clear catalysts for growth, and its securities could fall in price from any negative news.

Pop Mart shares fell nearly 9% at the opening of trading in Hong Kong, to their lowest level in more than a month. The drop was the deepest since April. The collapse occurred after JPMorgan Chase downgraded the toy maker from "above market" (Overweight, consistent with the recommendation to buy) to Neutral (Neutral), and the target price - from 400 to 300 Hong Kong dollars (from $51.4 to $38.6) and excluded the company from the list of securities with expected growth catalysts.

"We believe the price (of Pop Mart shares - Oninvest) has an ideal scenario built into it, and any even minor deviation of fundamentals for the worse from market expectations or negative media coverage - such as reports of price cuts in the secondary market or third-party brand licensing issues - could lead to a price correction," Bloomberg quoted JPMorgan in a research note.

The bank said that of Pop Mart's seven anticipated catalysts for growth, four have already materialized - its brilliant results for the first half of 2025, its collaboration with Uniqlo, its inclusion in the stock index and the opening of jewelry stores. The remaining three catalysts - the release of animated content, the launch of Labubu 4.0, and the introduction of interactive toys to Pop Mart's product line - have "lower visibility," meaning they are characterized by a low degree of predictability. JPMorgan considers it inadvisable to buy Pop Mart shares right now and advises to wait until late 2025 or early 2026, when the reasons for growth will become clearer, according to China-focused financial portal Aastocks.com.

JPMorgan downgraded Pop Mart amid signs that the hype around its toys is cooling off. The markup on Labooboo - plush toys with bunny ears that have been chased by celebrities from BlackPink's Fox to David Beckham - is shrinking in secondary markets in China. Pop Mart shares have also seen a sharp drawdown, with the stock losing nearly a quarter of its value since hitting a record high on Aug. 26 and the company's capitalization falling nearly $13 billion. But even with today's collapse, Pop Mart's stock is still up more than 180% since January and is still the best performing stock in the Hang Seng Index at 2025, Bloomberg notes.

According to FactSet, none of the stock analysts currently recommends selling Pop Mart shares. 36 experts recommend to buy them (ratings Buy and Overweight). Two more analysts advise to keep Labubu securities in the portfolio, but not to buy new shares (rating Hold).

Nevertheless, Bloomberg notes a tendency to weakening optimism on Wall Street. According to the agency, the ratio of the number of "buy" ratings on Pop Mart shares to the total number of all analytical recommendations on this paper fell to 91% - the lowest level for the year.

This article was AI-translated and verified by a human editor