Entertainment Stocks Seeking COVID Solutions Online... Investor Interest Rises

[Asia Economy Reporter Eunmo Koo] The stock prices of entertainment stocks have been showing a recovery trend since the beginning of this month. Despite the impact of the novel coronavirus disease (COVID-19), investors seem to be paying attention to the fact that these companies are expanding overseas markets online and finding solutions to expand overseas fandoms, which is a key factor for stock price increases.

According to the Korea Exchange on the 23rd, on the 20th, JYP Ent. (JYP) closed at 39,900 KRW, up 0.25% (100 KRW) from the previous trading day. JYP's stock price has been recovering this month, rising 30.6%, showing more than three times the increase compared to the KOSDAQ return (9.8%). Last week, JYP was also the most net-purchased stock by foreign investors in the KOSDAQ market (net purchase of 22.4 billion KRW).

Big Hit Entertainment (Big Hit), which entered the stock market on the 15th of last month, also experienced a drop to a low of 142,000 KRW on the 30th of last month due to supply and demand factors, but has been on an upward trend since the beginning of this month, recording a 30.0% return as of the 20th. YG Entertainment, which had recorded a nearly 40% decline since its September peak, also joined the recovery trend, rising 15.2% in November.

It is interpreted that investors are paying attention to the fact that the entertainment industry is expanding its market overseas and finding solutions to increase content sales by actively expanding online despite the impact of COVID-19. Park Hakyeong, a researcher at Korea Investment & Securities, said, “Online concerts, which emerged due to the impact of COVID-19, have proven that it is possible to generate profits by attracting many audiences even with low ticket prices,” and added, “Even if offline concerts resume, by running online concerts in parallel, the scale of sales will increase and the profitability of the concert business will improve.”

Among them, JYP is evaluated as showing the most remarkable moves by actively promoting localization strategies. JYP is preparing for the official debut of the Japanese girl group ‘NizIU’ next month, and the Chinese boy group ‘Project C’ is also preparing to debut in the second half of next year.

Namsoo Lee, a researcher at Kiwoom Securities, predicted, “NizIU is expected to level up content sales growth through localization, and a structural improvement trend is anticipated due to the expansion of fandom size.” He also analyzed, “The artist debuting in China next year is expected to quickly solve concerns about fan gathering and monetization, which rookie groups have, based on NizIU’s localization story, leading to performance growth following the reopening of the Chinese market.”

Big Hit, which experienced a stock price decline due to supply and demand issues and the absence of offline concerts after listing, is also on an upward trend due to active activities of its artists and expectations for concert sales in the fourth quarter. BTS’s online concert on the 10th and 11th of last month was watched by 993,000 paid viewers, and the recent album ‘BE’ was released. Additionally, a joint online and offline concert by artists under Big Hit Labels is scheduled for the end of December, and related revenues are expected to be recognized.

Minha Choi, a researcher at Samsung Securities, said, “The third-quarter results confirmed a strong profit level based on artists’ intellectual property (IP),” and predicted, “From the fourth quarter, the scale of profits will increase through active activities of artists and indirect sales growth via Weverse and others.” According to financial information provider FnGuide, Big Hit’s operating profit for the fourth quarter of this year is estimated to increase by 46.8% compared to the previous quarter, reaching 58.9 billion KRW.