Labubu Premiums Evaporate As Deutsche Bank Calls The Top On Pop Toy Mania
The seemingly unstoppable ascent of China’s pop-toy giant, Pop Mart, has hit a pivotal juncture. For investors riding the wave of the "Labubu" craze, a new research note from Deutsche Bank serves as a sobering reality check. While the 2025 headline numbers remain staggering, cracks are forming in the foundation of the hype cycle.
In a report dated December 1, 2025, Deutsche Bank analyst Sammi Xu resumed coverage of Pop Mart with a "Hold" rating and a target price of HK$228. The thesis is classic economics colliding with fickle consumer trends: the company has solved its supply shortage, but in doing so, it may have killed the scarcity that drove the mania.
The "Availability Paradox"
The core of Deutsche Bank’s argument rests on what they term the "availability paradox." Pop Mart has aggressively ramped up production to meet insatiable global demand, increasing capacity from approximately 10 million units in the first half of 2025 to a staggering 50 million units by year-end.
While this maximizes short-term revenue, it risks transitioning the company's flagship IP from a coveted, scarcity-driven luxury to a mass-market commodity.
"We view Labubu's increased accessibility as a double-edged sword: its widespread availability could dilute its fashion appeal, especially as other blockbuster IPs have not yet emerged," the report notes.
The estimated net profit for 2025 is projected to skyrocket by over 300% year-over-year to RMB 14.3 billion yuan (US$1.97 billion). However, Deutsche Bank argues that this success simply cannot be extrapolated linearly into 2026.
Secondary Market Signals: The Bubble is Deflating
For observers trained to look past corporate press releases and into real market dynamics, the secondary resale market is flashing red. During the peak of the mania in mid-2025, "secret editions" of Labubu figures commanded massive premiums, driven by speculators and collectors engaging in price arbitrage. That arbitrage window is closing fast.
According to the bank's channel checks, premiums for popular Labubu editions have witnessed a dramatic reduction since August 2025.
"This decline is evidenced by a reduction in price premiums for popular Labubu editions and mixed reviews on social media... For recent product launches, such as 'Labubu Mini' and 'the Monsters 1 a.m.,' price discounts were observed almost immediately post-launch, disappointing both collectors and resellers."
When the scalpers leave the market because the flip is no longer profitable, organic demand is left exposed. The report highlights that asking prices for regular editions on China’s trading apps like "Qiandao" or "Xianyu" have fallen below retail prices—a stark contrast to the mania seen just months ago.
From Queues to Glut
The operational shift is palpable. Earlier in 2025, supply shortages forced consumers to queue for hours or pre-book months in advance, creating a sense of exclusivity that arguably drove Pop Mart’s overseas store productivity to levels rivaling luxury peers.
Now, inventory checks across the US, UK, and Asia show that products are readily available.
"Pop Mart's efforts to maximize product availability could boost its near-term revenue. However, we think this is also likely to transition Labubu from a supply-constrained fashionable IP to a mass-market product, which should inevitably weigh on Pop-Mart's valuation."
Global Google Trends data further corroborates this cooling, showing a decline in search interest since mid-2025, suggesting that the viral momentum of the IP has peaked.
Valuation Trap: The 2026 Cliff?
The stock currently trades at what appears to be an undemanding 18x to 20x 2025 estimated earnings. However, this multiple is deceptive if the "supercycle" of the Labubu IP is ending without a clear successor.
Deutsche Bank outlines a divergent path for the future via two scenarios:
- The Bear Case: Labubu popularity peaks in 2026 with no new IP to offset the decline. This results in a 20% drop in China revenue and a 2026 net profit of just RMB 10.6 billion—implying the stock is actually trading at a much richer 23x forward earnings in a shrinking environment.
- The Bull Case: Robust growth continues, with overseas revenue jumping 50%. This scenario sees net profit hitting RMB 23.1 billion, making the stock look cheap at 13x earnings.
For now, the bank remains cautious. With Pop Mart projected to sell nearly 145 million Labubu units in 2025 alone, market penetration is already substantial.
"Given the cyclical nature of collectible-IP trends, growth trajectories are rarely linear... It is prudent to remain cautious, particularly if the purchase repetition rate in 2026 stays below 100%."
Investors are left holding a stock that has delivered spectacular growth but now faces the oldest problem in the fashion and collectible world: once everyone can have it, nobody wants it.