Game ETFs Slump Amid Lack of Earnings and New Title Momentum

Game Stocks Left Behind in the Bull Market
Krafton, Shift Up, and Com2uS Hit 52-Week Intraday Lows
Game ETFs Also Post Negative Returns Amid Sluggish Game Stocks
No Momentum Due to Weak Earnings and Lack of New Releases

Although the bull market continues, game stocks and game exchange-traded funds (ETFs) appear to be left out of the rally. Due to a lack of earnings momentum and new releases, further weakness is expected.

According to the Korea Exchange on October 21, all game ETFs have posted negative returns this month, reflecting sluggish performance. TIGER Game TOP10 declined by 4.98% this month, KODEX Game Industry fell by 4.69%, HANARO Fn K-Game dropped by 4.57%, TIGER K-Game decreased by 3.57%, and RISE Game Theme was down by 3.19%. In contrast, the KOSPI rose by 11.39% during the same period.

The poor performance of game stocks has led to weakness in game ETFs. On the previous day, Krafton, Shift Up, and Com2uS each hit their 52-week intraday lows.

The main reasons cited for the weakness in game stocks are poor earnings and the absence of new title momentum. While Krafton, the leading game stock, is expected to post solid third-quarter results this year, there is a lack of momentum until the release of new titles next year. On the previous day, Daishin Securities lowered its target price for Krafton by 18.5% to 440,000 won, citing the absence of momentum in the near term. Lee Jieun, a researcher at Daishin Securities, stated, "We reduced the 12-month forward earnings per share (EPS) by 11% to reflect the decline in 'PUBG' traffic and adjustments to the new release schedule. We also applied a 10% discount to the multiple (price-to-earnings ratio) compared to global peers, reflecting that it is still too early for new title momentum." She added, "While the third quarter is expected to show solid results thanks to seasonal effects and various updates to PUBG, PC traffic has been gradually declining since October due to a lack of content updates and the release of competing titles. Similarly, on mobile, the sales ranking dropped during the first three weeks of October, affected by the rebound of competing titles in China and the off-season in the fourth quarter."

There are also assessments that the industry lacks development capabilities and growth potential. Kang Seokho, a researcher at Shinhan Investment Corp., pointed out, "They have not demonstrated competitiveness through new releases for an extended period, and it is difficult to confirm short-term synergies with acquired companies." He added, "While there is no disagreement about stable cash flow, it is difficult to expect explosive top-line growth and operating leverage from new releases, which is typically anticipated in the gaming sector."

Shift Up's third-quarter results are expected to fall short of market expectations. NH Investment & Securities forecasts Shift Up's third-quarter revenue at 78.1 billion won, up 34.7% year-on-year, and operating profit at 41 billion won, up 15.2%. Ahn Jaemin, a researcher at NH Investment & Securities, said, "Shift Up's third-quarter operating profit will fall short of the consensus (the average forecast of securities firms) of 47.8 billion won." He added, "While some revenue from 'Stellar Blade' and 'Nikke China' will still be recognized in the third quarter, much of this revenue is expected to disappear from the fourth quarter onward. Furthermore, considering that the new title release initially expected in the second half of 2026 has been postponed to after 2027, we have lowered our earnings estimates for 2026."

Com2uS is also expected to report weak third-quarter results. Kim Hyonyong, a researcher at Hyundai Motor Securities, said, "Third-quarter revenue is expected to increase by 2.5% year-on-year to 177.1 billion won, and operating profit is projected to rise by 57.1% to 2.2 billion won. However, this is 7% and 54% below consensus for revenue and operating profit, respectively." He explained, "Despite the strong performance of baseball titles, the lackluster results of new releases and continued negative growth in role-playing games (RPGs) limited consolidated revenue growth to just 2%. Operating profit is expected to fall far short of market expectations due to increased marketing expenses amid sluggish sales growth."

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