Lone Game Stocks in a Bull Market... Is the Sorting Process Starting?

Target Price Raised for Neowiz and Pearl Abyss with Anticipated New Releases
NCSoft and Kakao Games Lower Their Expectations

[Asia Economy Reporter Kwon Jae-hee] Game stocks, considered representative growth stocks, have continued a sluggish trend since last year due to global interest rate hikes and deteriorating earnings. Amid this, some stocks have drawn attention for having their target prices raised by securities firms. The momentum for a rebound in game stocks ultimately lies in 'new releases.' Securities firms unanimously agree that game stocks need to be carefully selected based on 'new releases.'

According to financial information provider FnGuide on the 24th, among the top nine game stocks by market capitalization, four companies (NCSoft, Kakao Games, Pearl Abyss, Com2uS) reported fourth-quarter earnings last year that fell short of market expectations. Three companies (Netmarble, Wemade, Neowiz) met expectations, while only two companies (Krafton, W Games) exceeded expectations.

The outlook for this year is also not bright. Domestic mobile payment amounts decreased by 10% compared to the previous year (2021). January of this year also saw about a 1% decline compared to the previous quarter, showing no signs of a rebound. Globally, January payment amounts fell about 5% year-on-year, making it difficult to expect a boom like the COVID-19-driven surge in the game market in 2021 for the time being.

Amid this, there are stocks with positive forecasts from securities firms. A representative stock is Neowiz. Mirae Asset Securities raised Neowiz's target price by 9% from the previous level to 60,000 KRW. NH Investment & Securities also raised it from 50,000 KRW to 63,000 KRW, and Daol Investment & Securities raised it from 50,000 KRW to 65,000 KRW.

Securities firms agree that the reason for raising Neowiz's target price is the expectation for 'new releases.' Neowiz plans to launch various new titles this year, including 'P-ui Geojit' (P's Lie), raising expectations for earnings improvement. Supported by this, Neowiz's stock price rose 28.69% from January 2 to February 23 this year.

Choi Seung-ho, a researcher at Sangsangin Securities, said, "We present Neowiz as the top pick in the industry," adding, "Neowiz has outstanding lineups for this year and next year, and its valuation, with a price-to-earnings ratio (PER) of 13 times, is the lowest in the industry, making it attractive for investment."

Pearl Abyss, Netmarble, and W Games are also game stocks whose price targets have been raised by securities firms. Despite varying fourth-quarter earnings results?Pearl Abyss falling short of forecasts, Netmarble meeting them, and W Games exceeding them?the positive outlook for these three stocks is also driven by expectations for 'new releases.' Eugene Investment & Securities raised Pearl Abyss's target price from 41,000 KRW to 48,000 KRW. Jung E-hoon, a researcher at Eugene Investment & Securities, said, "Expectations for the next title 'Red Desert' will become clearer from mid-year," explaining the target price increase. Netmarble received high evaluations due to the announcement of specific new release schedules, and W Games was also highly rated as the releases of new titles 'W Casino 2.0' and 'Spinning in Space' approach.

On the other hand, target prices for NCSoft and Kakao Games were lowered. Six securities firms, including Daol Investment & Securities, Hana Securities, and Kiwoom Securities, downgraded NCSoft's target price. Kakao Games also saw target price cuts from firms such as Kiwoom Securities. Kim Ha-jung, a researcher at Daol Investment & Securities, analyzed, "The growth of game companies depends not on sales from existing titles but on new releases," adding, "For profit growth, the 'new release' momentum is inevitable."

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