[Into the Stock] NC, Stock Price Halved in One Year... Target Price Continues to Be Lowered

Last Year's Bonus Party Performance Holds Back
Stock Market Sets Target Prices at 500,000 to 900,000 Won Range

[Asia Economy Reporter Minji Lee] NCSoft has continued its downward trend after announcing fourth-quarter results last year that fell significantly short of market expectations. Its market capitalization has evaporated by more than 11 trillion KRW due to a stock price that has halved in just one year. Although securities firms are revising their target prices downward amid lowered earnings forecasts, opinions are divided on whether it is still advisable to continue investing.

As of 1:10 PM on the 21st, NCSoft's stock price was trading at 482,000 KRW, down 2.13% from the previous trading day. The company's stock price has dropped 27% just this year. Expanding the period to one year, it has fallen about 48%, with the market capitalization shrinking from 21.84 trillion KRW to 10.8 trillion KRW, a loss of approximately 11 trillion KRW. After concerns over earnings since the second quarter of last year caused the stock price to slump to around 500,000 KRW, it rebounded to the high 700,000 KRW range at the end of last year, buoyed by the success of Lineage W and entry into the NFT (Non-Fungible Token) market, but it has since collapsed weakly this year.

The recent continued decline in stock price is due to falling sales and rising costs. In the fourth quarter of last year, the company recorded sales of 755.2 billion KRW and operating profit of 109.5 billion KRW, significantly below market expectations (800 billion KRW and 221.1 billion KRW, respectively). Despite the success of Lineage W, sales of existing flagship games such as Lineage and Aion dropped sharply, resulting in overall sales being lower than expected. Additionally, operating expenses reflected 650 billion KRW, with performance bonuses (90 billion KRW) recorded higher than expected and marketing expenses (120 billion KRW) more than doubling compared to the previous quarter, causing profitability to fall short of expectations.

Seonghyeok Hong, a researcher at Samsung Securities, evaluated, "Despite the record-breaking success of Lineage W, quarterly sales remain in the 700 billion KRW range, which means that the existing user base has not expanded since expanding to mobile devices," adding, "The performance bonus spree bruised the fourth-quarter results."

There are no events expected to drive a rebound in earnings in the near term. According to financial information provider FnGuide, this year's operating profit estimate has been revised downward by more than 24% compared to two months ago, to 830.4 billion KRW. This is because existing games such as Lineage M, Lineage 2M, and Blade & Soul 2 are expected to continue a downward stabilization trend without a significant sales rebound. Although the release schedules for new titles this year (third quarter: Lineage W with NFT applied in North America and Europe, fourth quarter: Project TL release) and next year (Project E, Project R, Project M, Blade & Soul S) are tightly packed, there are no concrete movements yet, making it difficult to predict their success.

Securities firms are also lowering their target prices one after another. Since the fourth-quarter earnings announcement last year, 12 securities firms have revised their target prices downward, ranging from the 500,000 KRW level to the 900,000 KRW level. It is analyzed that the outlook varies depending on whether the emphasis was placed on short-term earnings trends or future growth potential.

The securities firm with the lowest target price is Hanwha Investment & Securities, which also lowered its investment opinion from "buy" to "neutral." Sohee Kim, a researcher at Hanwha Investment & Securities, analyzed, "Since a major new release is planned for the fourth quarter, there is no new release momentum in the first half, and the burden of increased costs including labor and marketing expenses may cause profit growth to be lower than expected." The company plans to maintain marketing expenses at about 10% of sales this year, as it did last year.

On the other hand, some opinions suggest that if the company focuses on new releases combined with blockchain technology such as NFTs, the current stock price is attractive from a buying perspective. Hyunyong Kim, a researcher at Hyundai Motor Securities, said, "The company's future strategy is to release multiple games across various genres to drastically reduce dependence on the Lineage IP," adding, "It is reasonable to have expectations for the tightly packed new releases from the second half of the year and the potential advancement of the blockchain universe platform."

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