[Into the Stocks] Kakao Games Rebounds on Odin's Performance... Remaining Challenges Ahead

Stock Price Soared 24.52% on the 2nd
But Tough Competitors Still Remain
Need for In-House Game Development Capability

[Asia Economy Reporter Gong Byung-sun] Kakao Games surged thanks to the strong performance of its new title, "Odin: Valhalla Rising" (Odin). However, as the mobile game market is expected to become even more competitive, there are calls for the company to strengthen its in-house development capabilities.

According to the Korea Exchange on the 13th, as of 9:18 a.m., Kakao Games recorded 80,200 KRW, up 0.25% (200 KRW) from the previous trading day. Looking at the entire month of July, Kakao Games’ upward trend is clearly evident. On the 2nd alone, the stock price surged 24.52%, and compared to early this month, the stock price had risen 38.41% as of the previous day.

Along with the stock price surge, the market capitalization (market cap) ranking also rose. Kakao Games, which was ranked 6th on the KOSDAQ as of the 1st, soared to 2nd place in just one day. This means that within less than a year since its listing in September last year, it has secured a top position in the KOSDAQ market cap rankings.

Odin’s Performance Exceeds Expectations... Daily Revenue Surpasses NCSoft Games

This is due to the excellent performance of the newly released Odin at the end of last month. Shortly after its launch, it surpassed NCSoft, attracting public attention. In May, NCSoft’s games held the top three spots in Google Play revenue, demonstrating NCSoft’s strong position in the gaming market. However, on the 2nd, Odin took the number one spot.

It is positive for Kakao Games that this is not a one-time ranking change. Lineage M and Lineage 2M generate daily revenues in the mid-1 billion KRW range, but Odin recorded sales of 7 billion KRW on its first day. Accordingly, on the 12th, Ebest Investment & Securities significantly raised its estimate for Odin’s domestic daily revenue in the third quarter of this year from 1.86 billion KRW to 3.24 billion KRW.

The overall earnings outlook is also turning positive. Ebest Investment & Securities forecasts third-quarter sales to increase by 174.7% year-on-year to 413.5 billion KRW, and operating profit to rise by 278.8% to 80.4 billion KRW. These figures represent increases of 44.3% and 80.8%, respectively, compared to previous estimates.

Games scheduled for release in the second half of the year are expected to contribute to future earnings momentum. Uma Musume Pretty Derby, planned for release in the fourth quarter, is expected to be reflected in earnings starting from the first quarter of next year. Uma Musume Pretty Derby is known as Japan’s biggest hit. Soul Artifact and DisteLado are also scheduled for release in the second half of this year.

Concerns Over Rapid Stock Price Rise... Need to Strengthen In-House Development Capabilities

However, there are voices of caution regarding the rapid stock price increase. Sung Jong-hwa, a researcher at Ebest Investment & Securities, said, “After reaching number one in domestic Google revenue rankings, the stock price rose too steeply,” adding, “It seems that most of the new title momentum has already been reflected.” Accordingly, Ebest Investment & Securities downgraded its investment opinion from ‘Buy’ to ‘Hold.’

Market competition is expected to intensify further. NCSoft’s new title Blade & Soul 2 is expected to be released in the third quarter. Blade & Soul 2 is regarded as a major title, with an expected daily revenue of 3 billion KRW. In fact, the number of pre-registrations for Blade & Soul 2 reached 2 million in just one day. Researcher Sung also predicted that NCSoft would regain the top sales position once Blade & Soul 2 is released. Netmarble is also preparing to launch games based on well-known IPs such as Marvel Future Revolution.

In the long term, there are also calls for Kakao Games to strengthen its in-house development capabilities. Odin and the highly anticipated Uma Musume Pretty Derby, scheduled for release in the fourth quarter, were developed by external studios Lionheart Studio and Cygames, respectively. Although Kakao Games acquired domestic game developer XL Games in 2019 and developed Dalbitjogaksa in-house, it faced issues such as operational immaturity and game errors early after launch. Jeong Ho-yoon, a researcher at Korea Investment & Securities, said, “While Kakao Games maintains good relationships with overseas game companies and can continuously release good games, revenue is split evenly with developers, resulting in low margins,” adding, “To connect Kakao Games’ IP to game development, it must have its own development capabilities.”

This content was produced with the assistance of AI translation services.