Shares in Pop Mart slumped almost 9% in Hong Kong on Monday, the steepest fall since April, as demand for its viral Labubu toy looks to be quickly losing steam.

The Beijing-based toymaker, famous for its “blind box” collectibles, has shed almost A$20 billion in market value since late August.

Despite the steep drop, the stock remains up more than 180% this year, making it one of the best performers on the Hang Seng Index.

The Labubu dolls, which have been endorsed by celebrities including Rihanna and David Beckham, have fuelled record sales for Pop Mart and sent its market cap soaring past Western giants Hasbro and Mattel.

But cracks are showing in the secondary market, with resale prices for Labubu figurines tumbling as supply ramps up.

In Australia, retailers such as Big W cashed in on the Labubu craze, selling $84 dolls that sparked long queues, online sell-outs, and even a wave of controversial counterfeits.

Investment bank JPMorgan cut its rating on Pop Mart from ‘Overweight’ to ‘Neutral’ and slashed its price target by 25% to HK$300 (A$60), warning that the stock’s lofty valuation left “little margin for error.”

Analyst Kevin Yin said the company’s risk/reward profile “looks less favourable,” noting that even minor disappointments could spark further weakness.

The downgrade comes as Pop Mart prepares new product launches, including Labubu & Friends animation, “Labubu 4.0,” and interactive toys slated for release ahead of Christmas.

But analysts say visibility on those catalysts is low, with investors questioning whether the company can replicate past viral hits.

While the company still sees strong sales of other toy lines and expanding international operations (Pop Mart runs 500 stores and thousands of vending “roboshops” worldwide), its reliance on Labubu remains a double-edged sword.

With shares now trading at over 23 times forward earnings, analysts say Pop Mart must prove it can deliver fresh intellectual property to sustain momentum.