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Unpredictability is what Pop Mart investors must shoulder

Pop Mart stock plunged after earnings – down 23% on Wednesday and down 10% on Thursday.

Pop Mart’s forecast of 20% or so rev growth in 2026 is lower than what is expected and is a sharp decline after 185% growth in revenue in 2025.

Labubu is still one of the hottest fashion toy IP worldwide with no competitors I think.

However, investors can’t reliably forecast future rev and thus cash flows of Pop Mart as nobody knows whether Labubu can sustain its mojo / for how long and how far.

Unpredictability is usually a negative thing, but people disregarded it as a risk when Labubu was in rapid growth mode. The “upside” unpredictability blinds investors – they liked it actually.

Now if you really want to be an investor in Pop Mart, you need to be comfortable with this inherent unpredictability.

One way to think about this is that Pop Mart is ultimately a very good channel like Tencent. Whatever it incubates and sells, its stores will sell them well. Pop Mart stores are the product of Pop Mart, alongside the IPs like Labubu.

However, to say Pop Mart stores is like WeChat is too much a compliment for Pop Mart so far. Network effect that is so strong and unique that WeChat really doesn’t have a competitor.

US paratroopers going to middle-east

The Pentagon has ordered about 2,000 soldiers from the Army’s 82nd Airborne Division to begin moving to the Middle East to give President Trump additional military options even as he weighs a new diplomatic initiative with Iran

– The New York Times

I was wondering what are chances that troops are assembled but won’t be put in use.

Paratroopers are meant to be deployed for ground operations. It’s not just bombing around.

I ask ChatGPT to summarize precedents that troops were assembled but didn’t act.

2013 Syria. The U.S. moved forces into position for possible strikes after Assad’s chemical-weapons attack, and Obama said he had decided to take military action, but then paused for congressional authorization and the strike never happened. That is probably the clearest modern example of “assembled and ready, but ultimately did not act.”

2023 Eastern Mediterranean after Oct. 7. The U.S. surged the USS Gerald R. Ford carrier strike group to the eastern Mediterranean explicitly “to deter” escalation. That force was assembled in-theater as a warning and stabilizer, not for an immediate attack. Reuters later described its role as helping prevent a broader regional conflict.

1994 Kuwait / Iraq (Operation Vigilant Warrior). The U.S. rapidly deployed substantial forces after Iraqi units moved toward Kuwait. President Clinton later said the speed of the deployment helped Iraq “get the message,” after which Iraqi forces withdrew and U.S. combat troops began going home without a war.

1988 Honduras (Operation Golden Pheasant) also fits the pattern: U.S. troops were rushed in after a cross-border crisis with Nicaragua, but the deployment functioned mainly as deterrence and the situation de-escalated before major combat.

And cases when that US already went into war/conflict, but only air strike etc.; then troops for ground operations were assembled but didn’t use.

Kosovo, 1999. The U.S. and NATO were already in an active air war against Yugoslavia in Operation Allied Force. After the bombing campaign started, the U.S. deployed Task Force Hawk to Albania — an Apache-heavy Army force built for possible attacks on Serbian ground forces in Kosovo. But despite being assembled in theater for that purpose, the Apaches never flew a combat mission and the task force never fired a shot in combat before the war ended. That is probably the closest precedent to “already fighting from the air, ground-capable forces assembled, but not used.”

A second, somewhat broader example is Desert Storm, 1991. The coalition had already begun the air campaign against Iraq on January 17, 1991. Meanwhile, a very large U.S. Marine amphibious force was assembled offshore in the Gulf; official Marine Corps history says the 4th and 5th MEBs plus the 13th MEU formed the largest Marine combat landing force since the Cuban Missile Crisis. But the expected amphibious landing into Kuwait never happened. Instead, the force was used mainly as a threat/deception tool to pin Iraqi forces while the actual main ground offensive came from elsewhere.

Why CFOs may not be good CEOs

I believe excellent CEOs need a set of unique skillsets – they need to be able to unite people, rally the morale, be bold and innovative in strategy.

Good CFOs are very good at numbers, very analytical when presented a well-defined question. They are also responsible for financing and executing M&As which can be strategical.

I think excellent CFOs can bring CEO-like value when they proactively pursue M&A deals or actively manage acquired companies. However, this is not a base case.

I could be wrong, but more often than not, CFOs don’t really need to be innovative or think outside the box to be okay – they are fine to be pragmatic and consistent, and sometimes expected to be so.

When CFOs become CEOs, there might be an attendance to deliver near-term numbers rather than focus on real value creation.

It could also go wrong if they rely too much M&As – bad deals will cost a fortune and even mediocre deals carry opportunity costs.

Alibaba used to have Daniel Zhang as CFO and he became CEO in 2015. When he stepped down in Sep 2023, the annualized return during his tenure is at best bond-like.

That’s why I don’t feel good about Mixue Group – it announced that its CFO Zhang Yuan will become CEO, effective immediately. Mixue founders will stay as co-chairman though.

Let’s see.

Two values of e-commerce and Meituan

There are two core values provided by “e-commerce” platforms, transaction and discovery.

If you know what you want, search in Taobao, and put an order, Alibaba provides the “transaction” value.

If you just want to order McDonald’s food delivery, Meituan also provides the “transaction” value.

What shopping mall provides and what Taobao used to be famous for is that consumers are just wandering around / 逛 – this is how the “discovery” value can be provided.

“Discovery” is deserved to earn higher, and almost as a cut to final sales – businesses believe they win this incremental order because of you. In “transaction” mode, businesses believe they have already had the order; thus transaction providers can only earn the fulfillment fee.

In the transaction mode, the lowest transaction cost provider will naturally win more busines.

In the discovery mode, the provider that can generate more “new sales” can win more business.

So Tencent mini-program / mini-shop is good for luxury brands as the they just need a place to list. Consumers almost already know these brands. The lower than transaction cost the better.

Douyin, Xiaohongshu are better in discovery mode as users spend a lot of time in their app “wondering”. The apps are more likely than others to create incremental demand – users don’t know they want it until they see it.

Previously, transaction mode and discovery mode are served in the same place like Taobao.

This is also true for Meituan in food delivery or in-store dining. Chinese consumers scroll Meituan app for look for food delivery or dining ideas. Even if they are already in the restaurant or know what to order, they also go to Meituan to make related transaction.

Meituan also provides pre-defined sets for many in-store dining – this is tricky. Is this discovery mode? Consumers don’t know what to eat even they are already in the restaurant.

But I think it’s still more transaction mode. Think about the fixed tasting menus provided at a Michelin restaurant. Meituan doesn’t help create incremental demand here if I browse and purchase the $199 set via the app – the value is transaction or like credit cards.

All I want to say is that if Meituan will be like Taobao, competition will be from two fronts – one is by providing lower transaction cost, another is by stealing the discovery cake.

拭目以待

Where does Alibaba’s bullishness come from?

Alibaba recently outlined a 5-year target to $100bn AI+Cloud revenue, however many investors are either not convinced or skeptical of future monetization.

Why Alibaba has $100bn target in the first place?

Besides the delayed AI boom in China with potential breakthrough in domestic AI chip production, what are the drivers?

1) Amazon CEO Andy Jassy outlined $600bn goal in 10 years recently

$100bn would be about 700bn rmb and matches the AWS “number”.

2) Within Alibaba, there could be potential internal politics consideration

E-commerce is still the most profitable core business; Jiang Fan leads the e-commerce efforts, spending billions in quick commerce etc.

Eddie Wu leads the AI+Cloud and is CEO of Alibaba. This is growing fast but still not as profitable.

These two people might be fighting for resources and territory within Alibaba.

AI+Cloud needs to be bold.

700bn rmb rev with 15% EBITA margin will be ~100bn rmb EBITA.

This could be matching Alibaba’s China e-commerce adj. EBITA in 2026, which dropped from ~200bn though, due to massive subsidy.

For Jiang Fan, quick commerce is a way to paint growth picture for overall china e-commerce business.

Otherwise, Eddie Wu might get more of Alibaba’s incremental spending, which then will almost ensure Wu’s rise and Jiang’s fall.

Jiang was also smart in not picking the fight with PDD, which is probably harder to win. The fight with Meituan is not easy, but if you have to pick one to fight with between PDD and Meituan, Meituan is the choice.

Tencent also has already made the choice – it sold Meituan stake and kept PDD stake.

Fighting with PDD is more defending vs. fighting with Meituan is winning new businesses. KPIs will look more exciting in the new business.

88% drop in new household mortgage Jan-Feb 2026 vs 2021

In the first two month of 2026, China households increased mid-to-long-term borrowing by 165.4 bn rmb, vs 1356.1 bn rmb in the first two month of 2021.

That is a decrease of 88%.

Households’ new mid-to-long-term borrowing is mostly associated with mortgages / housing purchases.

Details below.

Feb 2026 – PBOC

前两个月人民币贷款增加5.61万亿元。分部门看，住户贷款减少1942亿元，其中，短期贷款减少3596亿元，中长期贷款增加1654亿元；

Feb 2021 – PBOC

2月份人民币贷款增加1.36万亿元，同比多增4529亿元。分部门看，住户贷款增加1421亿元，其中，短期贷款减少2691亿元，中长期贷款增加4113亿元

Jan 2021 – PBOC

1月份人民币贷款增加3.58万亿元，同比多增2252亿元。分部门看，住户贷款增加1.27万亿元，其中，短期贷款增加3278亿元，中长期贷款增加9448亿元

Stopping disclosure is a sure pressure in near term

Tencent Music $TME will no longer report the operating metrics on a quarterly basis such as Monthly Active Users (MAU) for online music services and Number of Paying Users for online music, starting from next quarter.

The stock dropped 24.65% in a day, with other concerns like more competition from ByteDance’s Soda Music.

It’s almost a sure thing that stopping disclosure on key operating metrics will make stock price under pressure.

A very similar case is Netflix in 2024.

In April 2024, Netflix announced it would stop reporting quarterly membership numbers and Average Revenue per Member (ARM) starting in 2025.

Netflix shares fell ~8% the day after the Q1 2024 report.

Here is the last report on these operating metrics.

 

The company argued that subscriber count is no longer the best indicator of health due to new revenue streams like advertising and “extra member” fees.

Netflix still discusses those in shareholder letters and gives financial guidance, like this for 4q25 earnings.

While $TME gave similar explanations, it didn’t give investors 4 quarters to adapt.

As advertising and other IP related offerings scale, and as we offer multi-tiered membership for online music subscriptions, the business impact of each paid membership varies. As a result, we are increasingly focused on revenue and profit as our primary performance indicators.

Given this evolution, starting from next quarter, we will discontinue the disclosure of certain quarterly operating metrics, including online music MAU, paying users and ARPPU.

We will instead report the number of total paying users across our music services annually, as of year-end.

– 4q25 TME earnings release

 

Three 40bn RMB investments

Bytedance’s Volcano Cloud: to lose 40bn RMB in 2026

Alibaba is subsidizing over 40bn RMB per year via Taobao Instant Commerce. (Over 50bn announced in July 2025 for next 12month; reiterated importance of subsidy in 2026 earlier this year)

Tencent announced more than 36bn investments in AI product development for 2026 with its 4q25 earnings, with no return KPI near term and more to come in the future.

These are 0.1% of China GDP already!

Better compensation, subsidy to consumers and businesses are also different kinds of GDP-boosting initiatives; big companies are doing their social responsibility jobs as well.

Apple vs China Internet: 礼尚往来

Apple cuts App Store fees in China by 5% – from 30% to 25%. Apple also said it commits to offer fee level that is “not higher than overall rates in other markets”.

This benefits the big Internet companies in China.

In return, these Chinese Internet companies are making efforts to promote and sign more people up for OpenClaw-like services, which can drive Apple sales via Mac Mini etc.

“Exchange of courtesies”.

Nongfu vs. PopMart

Nongfu is ~25x 2026 P/E with ~13% 2027 EPS growth

PopMart is ~15x 2026 P/E with 27% 2027 EPS growth

Nongfu enjoys almost 4 times PEG vs. PopMart.

PopMart sounds like fashion – however, I see no real competitor in its space.

Nongfu sounds like a staple that can only grow – however, I see more competition here than what investors may assume.