Large Game Stocks Stuck in the Swamp of Poor Performance

NC and Netmarble Stocks Falter Amid 2Q Earnings Slump
Krafton Faces Decline Since IPO... Era of Large Game Stock Hardships

[Asia Economy Reporter Minwoo Lee] Major game companies such as NCSoft and Netmarble are struggling to break free from their sluggish stock performance. The lack of new releases in the second quarter led to significantly poor earnings, cooling investor sentiment. However, with a concentration of new releases scheduled for the second half of the year, analysts suggest that a bottom-fishing strategy might be worth considering.

As of 11:38 AM on the 12th, NCSoft's stock price rose 0.51% from the previous day to 794,000 KRW. Earlier in the morning, it briefly dropped to the 770,000 KRW range for the first time since May 15. Following a sharp 3.07% plunge the day before when the second-quarter earnings were announced, the stock has struggled for two consecutive days. From May 29 to the previous day, NCSoft’s stock had already fallen about 6.1% as concerns over poor earnings were priced in. NCSoft announced preliminary second-quarter consolidated earnings of 538.5 billion KRW in revenue and 112.8 billion KRW in operating profit. While revenue decreased by only 0.01% year-over-year, operating profit plunged 46.04% during the same period. The actual poor earnings report appears to have further widened the decline.

Netmarble showed a similar trend. At the same time, its stock price dropped 3.66% from the previous day to 131,500 KRW, likely due to the impact of its disappointing earnings announcement. Netmarble reported second-quarter consolidated revenue of 577.2 billion KRW and operating profit of 16.2 billion KRW, down 15.8% and 80.2% year-over-year, respectively.

The lack of new releases in the second quarter seems to have affected both companies. NCSoft postponed the release of its most anticipated title, 'Blade & Soul 2,' several times before finally setting the release date for the 26th of this month. Netmarble’s anticipated title, 'Second Country,' was released late in the second quarter on June 10.

Rising labor costs also became a burden. In February, Netmarble decided to increase the annual salary of all employees by 8 million KRW. NCSoft announced in March that it would raise salaries by at least 10 million KRW per job category. Pearl Abyss, another major game company, also suffered poor earnings due to increased labor costs. It recorded second-quarter revenue of 88.5 billion KRW and an operating loss of 6 billion KRW. Revenue decreased by 32.8% year-over-year, and operating profit turned negative. The increase in labor costs is attributed to incentives and other payments totaling about 10 billion KRW distributed to all employees in May, resulting in a 48.5% year-over-year rise in labor expenses.

Meanwhile, Krafton, which entered the stock market as the largest game company by market capitalization, continues to show weak performance. At its IPO on the 10th, it started below the offering price of 498,000 KRW at 448,500 KRW. The previous day, it closed down more than 10% at 407,000 KRW. Since the IPO, the stock has fallen more than 18% compared to the offering price. However, it slightly rebounded to the 410,000 KRW range on the morning of the day.

In the securities industry, it is expected that major game companies will attempt a rebound with new releases in the second half of the year. Netmarble plans to release 'Marvel Future Revolution,' utilizing the intellectual property (IP) of Marvel Comics, on the 25th in the U.S. NCSoft will launch 'Blade & Soul 2' on the 26th, which set a domestic record with 7.46 million pre-registrations. Additionally, NCSoft is scheduled to reveal the new Lineage W title on the 19th. This is the first Lineage series release in about two years since Lineage 2M was launched in 2019 and is expected to be released within the year at the earliest.

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