NCSoft Falls Below 200,000 Won... Outlook Remains 'Cloudy'

The stock price of NCSoft, the leading game company, is continuously falling. Along with the aging of existing games, the poor performance of new games has cast a shadow over its earnings. Securities firms are also rushing to lower their target prices.

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On the 18th, NCSoft closed at 190,800 KRW, down 2,800 KRW (1.45%) from the previous trading day. This is a 52-week low based on the closing price. Compared to the all-time high closing price of 1,038,000 KRW on February 28, 2021, it has dropped by 80.92%. It is also the lowest closing price since January 3, 2015, when it was 188,000 KRW.

The decline in NCSoft's stock price is attributed to the aging of existing games and the failure of new releases to gain traction. Lineage M, which still ranks first in sales on Google Play, was released in 2017. Lineage W and Lineage 2M, ranked third and ninth respectively, were released in 2021 and 2019. Due to the aging of these games, a decrease in sales is a concern.

Jung Eui-hoon, a researcher at Eugene Investment & Securities, explained, "Lineage M maintained the top sales position in the fourth quarter, and Lineage 2M and Lineage W also benefited from their respective anniversary updates, but these only offset the decline in sales compared to the previous quarter. Although competition is expected to decrease this year compared to last year, a natural decline in mobile Lineage sales is inevitable."

Additionally, the poor performance of Throne and Liberty (TL), released on December 7 last year, is cited as another cause. After its launch, the number of servers quickly decreased from 21 to 10 due to a rapid decline in users. As a result, securities firms are also lowering their revenue forecasts for TL. Jung Ho-yoon, a researcher at Korea Investment & Securities, said, "TL, which was supposed to drive earnings improvement in 2024, is performing below expectations domestically," and "We are lowering the revenue estimate for TL from 398 billion KRW to 187.9 billion KRW."

As the situation worsened due to the aging of existing games and the absence of new releases, securities firms have lowered their target prices and investment opinions for NCSoft. Among the eight securities firms that issued reports on NCSoft from the 2nd to this day, all but two have lowered their target prices. Among them, Korea Investment & Securities downgraded its investment opinion from 'Buy' to 'Neutral' and did not provide a separate target price. The previous target price was 300,000 KRW.

The outlook for NCSoft's earnings is also declining. According to FnGuide, the expected sales and operating profit for NCSoft this year, as forecasted by securities firms a year ago, were 3.0045 trillion KRW and 740.1 billion KRW, respectively, but recently these have been reduced to 1.9782 trillion KRW and 240.1 billion KRW. Researcher Jung Eui-hoon said, "Due to TL's failure, there are concerns about a performance gap until the next major new release, 'Aion 2.' While cost efficiency improvements at the company-wide level may improve operating profit margin this year, poor sales growth will inevitably lead to weak earnings."

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