Wall Street talks about LABUBU and Moutai: Deja vu or paradigm shift?

Author: Ye Zhen, Source: Wall Street News

The explosive Labubu is jokingly called "Moutai for young people", so what are the similarities and differences between the two?

Bank of America recently released a report comparing this new trendy IP with the traditional liquor giant, trying to clarify whether it is a historical repetition of the consumption cycle or a profound paradigm shift.

Bank of America analysts Alice Ma, Chen Luo and Lucy Yu pointed out that although both are social currencies, Labubu's social attributes are more based on the common interests and values ​​of young groups, while Moutai's social functions are more based on power and hierarchical relationships. This difference reflects the essential difference between "new consumption" and "traditional consumption".

Bank of America pointed out that similar to Moutai, Pop Mart is also facing the dual test of IP cycle and investment attributes. If there is a long window period between Labubu and the next hit IP, the company's global growth may slow down.

In addition, investors cannot ignore the two major risks of regulation and market crowding. The report reminds that the current phenomenon of capital concentrated in the "new consumption" track is quite similar to the previous capital grouping of consumer blue-chip stocks represented by Moutai. The fragility of this crowded transaction may have a huge impact on valuation.

Bank of America maintains a buy rating for Pop Mart with a target price of HK$275. According to statistics, Pop Mart's stock price ranged from HK$34.4 to HK$283.4 in the past 52 weeks, and closed at HK$244.2 as of Monday.

Generational differences in social currency

The Bank of America research team believes that although Labubu and Moutai both have social currency attributes, there are obvious generational differences. Moutai's social function is more reflected in the role of a productivity tool as a "social/business lubricant", while Labubu represents the younger generation's pursuit of emotional value, providing consumers with an instant, delicate and affordable "dopamine" experience in the era of digital social media.

Analysts point out that in a digital world where consumers face "meaninglessness" and increased pressure, Labubu hints at China's gradual shift from an investment-driven model to a consumption-driven model. Moutai is deeply rooted in traditional Chinese culture and its globalization process is still in its early stages, while Labubu, which is highly in line with the global spirit of the times, has achieved significant global success.

Differences in social attributes: Moutai's social attributes rely more on power and hierarchy, and mainly serve business and other occasions; Labubu represents the social interaction based on interests and values ​​of the younger generation, emphasizing emotional value and instant gratification.

Consumption motivation: Moutai can be used as a "productivity tool" (business lubricant), while Labubu satisfies young people's pursuit of emotional value and "dopamine"-style consumption in a digital social environment, reflecting China's transformation trend from investment-driven to consumption-driven.

Globalization process: Moutai is deeply rooted in traditional Chinese culture and its globalization is still in its early stages; Labubu has achieved significant success worldwide and is in line with global trends.

The double-edged sword of IP cycle risk and investment attributes

While growing rapidly, Bank of America also pointed out the similar challenges of Pop Mart and Moutai, namely the dual test brought by the IP life cycle and product investment attributes.

Bank of America believes that it does not matter whether Pop Mart's net profit in 2025 is RMB 8 billion or RMB 10 billion, because it depends on the shipment speed of Labubu. Instead, it is important to balance the recent growth and IP life cycle.

IP life cycle risk: Moutai, with a century of historical precipitation and official endorsement, has proved its ability to cross cycles. However, Pop Mart and LABUBU have only 15 and 10 years of history respectively, and the IP life cycle is still a core risk.

The report believes that as an IP platform, Pop Mart's diversified IP portfolio can diversify risks, but LABUBU is crucial to its global success. If there is a long window period between LABUBU and the next hit IP, its global growth may slow down. In addition, while the "mainstreaming" of subculture drives growth, it may also dilute LABUBU's unique social identity, thereby alienating its core consumer groups.

Pros and cons of investment attributes: Moutai's history shows that "investability" is a double-edged sword, a booster in the up cycle and an amplifier in the down cycle.

The report noted that Pop Mart is actively managing second-hand market prices to ensure its appeal to young consumers and create a favorable environment for the release of new IPs and products. The recent decline in second-hand prices of LABUBU plush toy series is seen as the result of Pop Mart's active management of supply and demand dynamics.

Regulation and market crowding that cannot be ignored

The report finally emphasized that regulation and market sentiment are two other risk factors that investors must face.

Regulatory risk: Moutai has always been affected by policies such as price controls and anti-corruption campaigns. Similarly, Pop Mart is not in a regulatory vacuum. A recent article in the People's Daily reminded the market of related risks. However, Bank of America analysts believe that as Pop Mart's consumer groups become increasingly diversified, "mainstreaming" has reduced its risk exposure to minors in the Chinese market. At the same time, the growing overseas business (expected to contribute more than half of sales in 2025) also helps hedge the regulatory risks of a single market. However, this risk may still have a negative impact on the company's fundamentals or trigger "headline noise" that causes stock price fluctuations.

The fragility of "group" trading: dominant "crowded trading" may appear in every cycle of the capital market. The influx of funds into consumer blue-chip stocks represented by Moutai from 2016 to 2021 is quite similar to the current concentration of funds in the "new consumption" track with Pop Mart as the focus. Changes in capital flows and positions may have a huge impact on valuations-Moutai's forward price-to-earnings ratio was close to 60 times at the beginning of 2021, but is currently only 18-19 times. Although the recent changes in capital flows have put some pressure on "new consumption" stocks such as Pop Mart, the report believes that this "crowded" situation may continue for some time in the context of the scarcity of high-quality investment targets. The real turning point may need to wait until there is a meaningful turning point in high-frequency data in overseas markets, or when the strong recovery of the Chinese economy provides investors with more options.