"Invested in Karina With Confidence, But What Happened?"...SM Target Price Continues to Be Lowered [Weekend Money]

Securities firms are consecutively lowering their target prices for SM. Since the beginning of the year, SM's share price has dropped by more than 30%.

According to the securities industry on April 18, six brokerages-Shinhan Investment & Securities, Hanwha Investment & Securities, Eugene Investment & Securities, IBK Investment & Securities, iM Investment & Securities, and Meritz Securities-lowered their target prices for SM during the past week (April 13-17). Meritz Securities issued a report the previous day, cutting its target price from 180,000 won to 140,000 won per share. Earlier, iM Investment & Securities also reduced its target price from 160,000 won to 140,000 won. IBK Investment & Securities and Hanwha Investment & Securities set their new target prices at 120,000 won, while Shinhan Investment & Securities and Eugene Investment & Securities each lowered theirs to 130,000 won.

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This downward trend is drawing attention, as SM's first-quarter results are expected to slightly exceed market consensus. The consolidated results for the first quarter are estimated to show sales of 263 billion won and operating profit of 39 billion won, representing year-on-year growth of 13.6% and 19.7%, respectively. In addition, as groups such as aespa, RIIZE, and NCT WISH-mid- and lower-year artists-continue to expand the scale of their tours and fandoms, performance growth driven by tours and comeback schedules is also anticipated from the second quarter onward.

Minyoung Kim, a researcher at Meritz Securities, stated, "The mid- to long-term growth momentum remains valid due to the shortening of the monetization cycle for lower-year groups." However, she explained, "We are lowering the target price to reflect changes in group contributions stemming from artist contract changes and initial promotion expenses related to artists' global expansion." SM's share price, which hovered around 140,000 won at the start of the year, has now fallen below the 100,000 won level.

The recent decline in the entertainment sector's multiples has also contributed to the downward revision of target prices by the securities industry. Inhae Ji, a researcher at Shinhan Investment & Securities, commented, "Despite continued strong results, we reflected the recent decline in entertainment sector multiples, the relative underperformance amid a concentration of demand for large-cap stocks, and concerns about the sector having peaked."

Hyunji Lee, a researcher at Eugene Investment & Securities, pointed out, "On a consolidated basis, the inclusion of DearU's results will drive continued rapid growth, but in its core business, SM must demonstrate achievements in North America and prove its ability to attract audiences for concerts by both younger and older artists."

Nevertheless, these brokerages have maintained their 'buy' investment ratings. Ji added, "The current share price has fallen to a 2026 forecast price-to-earnings (PER) multiple of 14 times, which is lower than the historical low of 15 times that endured despite major artist-related incidents, the weak yen, and negative factors such as China's restrictions on Korean content. Given the proven structural improvements, limited downside for the share price, SM's strong market position in China, and its impending entry into North America, we recommend buying at the current price."

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