Pearl Abyss Falls Short of Q3 Earnings Estimates... New Release Delayed to Q3 Next Year

[Asia Economy Reporter Hwang Yoon-joo] Korea Investment & Securities forecasted that Pearl Abyss's third-quarter earnings will fall short of consensus. Accordingly, they maintained a 'Neutral' investment rating and did not disclose a target price.

Jung Ho-yoon, a researcher at Korea Investment & Securities, stated, "Third-quarter sales are expected to decline 6.6% year-on-year to 90.1 billion KRW, with an operating loss of 1.3 billion KRW, falling short of consensus."

Researcher Jung explained, "With no new releases, Black Desert Online sales are expected to decrease 3.1% quarter-on-quarter to 47.0 billion KRW (up 27.8% year-on-year). Black Desert Mobile sales are also expected to decline 7% quarter-on-quarter to 17.9 billion KRW (down 31.0% year-on-year)."

However, labor costs are on a decreasing trend. Total operating expenses are expected to increase 6% year-on-year to 91.4 billion KRW but decrease 7% quarter-on-quarter due to the removal of one-time incentives incurred in the second quarter.

The delay in new releases is a burden. Researcher Jung said, "We expect the release of Red Desert in the third quarter of 2023," adding, "Since it is a work developed with long-term dedication and the genre is an open-world action-adventure popular on consoles, the potential for success is quite positive."

However, there is still a long time until the release. Researcher Jung pointed out, "The mobile game market is generally slowing down," and "Pearl Abyss is also experiencing a decline in sales of the Black Desert series, so a new release is required to improve earnings." This means there are no clear factors for earnings improvement other than new releases.

He assessed, "If Red Desert achieves success beyond market expectations, the stock price could rebound sufficiently, but since a long time remains until release, there is no reason to rush to buy."

He added, "The inability to generate profits from the existing lineup is also a considerable burden," analyzing, "For the stock price to rise, the new release must be successful. If it fails, it means the downside risk increases accordingly."

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