[Click eStock] "CJ ENM’s Advertising Revenue Expected to Decline Due to TV Underperformance... Target Price Cut"

On April 9, KB Securities revised its target price for CJ ENM downward from 90,000 won to 74,000 won, citing overall advertising performance is expected to decline year-on-year due to the underperformance of TV. The investment rating was maintained at 'Buy'.

Choi Yonghyun, an analyst at KB Securities, stated, "We have lowered our target price by 18% compared to the previous target, mainly due to a downward revision of our return on equity (ROE) estimates reflecting weak TV advertising demand." He explained, "CJ ENM is shifting its business focus from traditional media (TV channels) to online video services (OTT), but this year, the decline in TV channels is expected to outweigh the growth in OTT."

CJ ENM's first quarter results this year are expected to fall short of market expectations. Analyst Choi estimated, "CJ ENM's first quarter operating profit will be 2.15 billion won, below the consensus (the average estimate by securities firms)," adding, "The TV advertising segment is likely to continue to see negative growth due to off-season effects and a decrease in market share following the Winter Olympics. Tving, despite the off-season, continued subscriber growth through key partnership services, but is expected to post an operating loss of 1.45 billion won due to the recognition of WBC broadcasting rights costs." He continued, "In the film/drama segment, the delivery of three titles from the Fifth Season series will result in 1.08 billion won in operating profit. In the music segment, despite album sales by AlphaDriveOne (1.44 million copies sold in the first week), a decline in the number of concerts and the poor performance of Mnet are expected to lead to an operating loss of 170 million won. In the commerce segment, external uncertainty is affecting consumer sentiment, and operating profit is expected to be 1.92 billion won."

The underperformance of TV advertising is attributed to a slowdown in demand due to macroeconomic issues and a shift in demand toward OTT. Analyst Choi said, "In particular, cannibalization from OTT advertising appears inevitable. As OTT platforms begin to increase the proportion of live content, advertisers' preference is rising, and Tving has set its 2026 advertising revenue target at 100 billion won, double the previous figure, signaling strong growth ahead. At present, CJ ENM's TV advertising revenue is still larger than its OTT advertising revenue, so total advertising revenue (TV+OTT) is expected to decline year-on-year."

Looking ahead, Analyst Choi highlighted the Tving-Wavve merger and the commercial success of music intellectual property (IP) such as AlphaDrive, Modisay, and Hype Princess as future share price catalysts for CJ ENM. He stated, "In the case of Tving, it needs to become large enough through the merger to drive the company’s overall performance. For music IP, the company aims to boost recognition through its own music channels and expects global expansion."

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