[Into the Stock] Wemade, Stock Price Drop and Operating Loss

[Asia Economy Reporter Junho Hwang] Can Wemade's stock price recover in the second half of this year? Wemade, which has recorded a significant decline in its stock price this year, posted an operating loss for two consecutive quarters, leading securities firms to paint a bleak future.

According to the Korea Exchange on the 28th, Wemade's closing price on the 27th was 57,300 KRW. Since recording 177,900 KRW at the end of last year, the stock price has fallen by 67.80%.

The outlook for the stock price darkened further as the company recorded an operating loss in the second quarter. The market expectation for Q2 was an operating profit of 22.8 billion KRW, but Wemade posted an operating loss of 33.3 billion KRW.

Although the new mobile game 'Mir M' was released on the 23rd of last month, its initial performance was sluggish, and various costs expanded significantly. Yoon Yeji, a researcher at Hana Securities, analyzed, "The daily revenue of 'Mir M' recorded around 700 million KRW, falling short of the market expectation of just over 1 billion KRW." Operating expenses increased by 13% compared to the previous quarter. Labor costs rose by 27% to 56.2 billion KRW compared to the previous quarter. Additionally, promotion costs of 8 billion KRW related to the launch of 'Mir M' and deferred costs related to participation in GDC in Q1 were reflected, raising the company's total sales proportion to 24.5 billion KRW, accounting for 25% of total revenue.

The outlook for the third quarter is also not optimistic. Ahn Jaemin, a researcher at NH Investment & Securities, lowered the target stock price to 80,000 KRW, stating, "Various business expansions centered on the WEMIX platform and the resulting investments and hiring are ongoing, so cost increases related to these businesses are expected to continue for the time being." Wemade has guided for about 80 new hires each quarter. The resulting increase in labor costs is expected to be around 3 billion KRW.

Lim Heeseok, a researcher at Mirae Asset Securities, lowered the global daily average revenue forecast for the flagship game 'Mir 4' for 2022 from 470 million KRW to 380 million KRW, a 19% decrease, and also adjusted the target stock price down to 85,000 KRW. He explained, "Considering the decline in 'Mir 4' revenue, we lowered the annual revenue forecast by 9%. We also took into account the high marketing costs due to the new game releases in the second half of this year and the main sponsorship participation in the 'G-STAR 2022' event." SK Securities changed its investment opinion to 'neutral' and lowered the target stock price to 49,000 KRW.

Kim Hajung, a researcher at Daol Investment & Securities, said, "There is a gap between hiring for the core game business and the blockchain business," and added, "Since it is difficult to specify the turnaround point for the blockchain business, if investors approach this as an investment point, there is a possibility that the wait will continue."

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