[Click eStock] Massive Migration from Twitch to AfreecaTV... Target Price Up 27%

Daishin Securities Report

[Asia Economy Reporter Minji Lee] Daishin Securities maintained a buy rating on AfreecaTV on the 5th and raised the target price by 27% to 140,000 KRW. This is because a positive spillover effect is expected due to user attrition caused by Twitch's reduction in video quality.

Twitch is downsizing its Korean operations due to network usage fee burdens. The limitations of revenue models based on sponsorships and subscriptions have also deepened losses in Korea. Accordingly, Twitch prioritized cost reduction by lowering the maximum live video quality from 1080p to 720p. Heo Jisoo, a researcher at Daishin Securities, said, “Twitch has a high proportion of comprehensive games where video quality is most important, and with major events such as the release of AAA game lineups like Overwatch 2 and Call of Duty in October, as well as the League of Legends World Championship, the issue of video quality degradation will become more sensitive.”

Twitch VODs are available in 1080p high quality, but this is not very meaningful. The reason for Twitch’s existence is as a one-person media platform that communicates with viewers. Since comment participation and reactions require ‘live’ interaction, if live video quality deteriorates, most users will inevitably be affected.

Third-quarter earnings are expected to be somewhat sluggish. Revenue is forecasted to grow 6% year-on-year to 75.1 billion KRW, while operating profit is expected to decrease by 3% to 23.3 billion KRW. Like other overseas internet companies, Twitch is undergoing a normalization process of revenue growth accelerated by COVID-19, and a decline in users’ willingness to pay is also a reason.

Researcher Heo said, “AfreecaTV will benefit from the influx of streamers and users from Twitch,” adding, “AfreecaTV has an advantage in securing contracts with famous teams such as LCK broadcasting rights and T1 due to its strong cash position.”

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