Same 'BBIG'... Game Stocks Still Struggling with Classic Challenges

NCSoft, the Leading Game Company, Stock Falls to Mid-700,000 KRW Range
Decline in Existing Titles' Sales and Delay in New Releases like Blade & Soul 2
Netmarble Also Drops 25% Compared to a Month Ago... Underperforming KOSPI's Growth Rate

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[Asia Economy Reporter Minwoo Lee] The stock prices of leading gaming companies such as NCSoft and Netmarble continue to struggle. Unlike the 'BBIG' sectors?bio, battery, and internet stocks?that led the post-COVID-19 era, these gaming stocks have failed to keep pace with the KOSPI's rise.

According to the Korea Exchange on the 14th, as of 9:27 a.m., NCSoft's stock price remained unchanged from the previous day's closing price at 744,000 KRW. This contrasts sharply with July, when the stock price nearly reached 1 million KRW as a representative untact (contactless) stock. Since recording 867,000 KRW on August 27, the stock has steadily declined without significant fluctuations, dropping over 13% during this period. Meanwhile, the KOSPI rose by 2.5% over the same timeframe.

This decline is attributed to decreasing revenue from its main income source, 'Lineage 2M,' coupled with the increasing likelihood of delays in new game releases. The estimated daily revenue for Lineage 2M is 1.75 billion KRW, down 20.5% from 2.2 billion KRW in the previous quarter. The overseas release of Lineage 2M and the launch of Blade & Soul 2, both scheduled for this year, are also expected to be postponed. Researcher Donghee Kim from Meritz Securities analyzed, "Since the implementation of social distancing level 2.5 last month due to COVID-19, all employees have been working in rotating remote shifts, causing delays in the final stages of game releases and potentially postponing the launch schedules of new titles."

Financial investment firms are also lowering their expectations for NCSoft. On the 6th, Ebest Investment & Securities set NCSoft's target price at 1.1 million KRW, a roughly 12% decrease from the previous 1.25 million KRW. KTB Investment & Securities lowered its target from 1.2 million KRW to 1.08 million KRW, and Hanwha Investment & Securities also reduced theirs from 1.2 million KRW to 1.1 million KRW.

Netmarble, also considered a leading player in the gaming industry alongside NCSoft, is experiencing a downward trend. As of 9:27 a.m. on the same day, its stock price fell 1% from the previous session to 152,000 KRW. After reaching a record high of 204,500 KRW on September 7, the stock has consecutively declined. Although the stock price surged sharply following the successive listings of Kakao Games and Big Hit Entertainment, in which it holds shares, investors appear to be taking profits as the gaming business performance has not supported these gains.

The third-quarter earnings are expected to be somewhat lackluster. According to financial information provider FnGuide, Netmarble's market consensus for the third quarter this year forecasts consolidated sales of 659.2 billion KRW and operating profit of 78 billion KRW. While sales are expected to increase by 6.35% year-on-year, operating profit is projected to decrease by 7.58%. Meritz Securities anticipates third-quarter operating profit to fall 25.9% year-on-year to 62.5 billion KRW. Researcher Kim explained, "The revenue from 'The Seven Deadly Sins' and 'A3: Still Alive,' which contributed to last quarter's growth, naturally declined, and the performance of newly released titles such as 'Blade & Soul Revolution,' 'Stone Age World,' 'Magumagu 2020,' and 'BTS Universe Story' was weaker than expected."