Lineage Slump Leads to Sharp Earnings Drop... Institutional Investors Leaving NC

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[Asia Economy Reporter Minwoo Lee] As NCSoft's stock price continues to struggle, institutional investors are massively withdrawing their investments.

According to the Korea Exchange on the 28th, institutional investors have net sold NCSoft shares worth 229.1 billion KRW so far this month until the previous day. This ranks sixth among the net sold stocks by institutional investors. Except for just five trading days from last month to the previous day, they have consistently net sold. This year alone, they have sold a total of 795.2 billion KRW worth of shares. This contrasts with the trend of continuous net buying every month since August last year. The stock price is also declining. As of 9:30 AM, it recorded 841,000 KRW, down 1.98% from the previous day. It has fallen 12.6% compared to February 2. During the same period, the KOSPI rose by 5.3%.

Interest seems to be waning as the first-quarter earnings are expected to be weak. According to financial information provider FnGuide, NCSoft's consolidated earnings forecast (consensus) for the first quarter of this year is 551 billion KRW in sales and 133.1 billion KRW in operating profit. Sales are estimated to decrease by 24.6% and operating profit by 44.9% compared to the same period last year. This is the first time since the third quarter of 2019 that NCSoft's earnings have contracted year-over-year.

Yuanta Securities interpreted this as the impact of poor performance from both main titles, Lineage 2M and Lineage M. Due to the expiration of the update effect, Lineage 2M's sales are expected to decrease by about 8% compared to the previous quarter and by a whopping 55.1% compared to the same period last year. The markets in Japan and Taiwan, where the game was launched in the first quarter, also fell short of expectations. In the Japanese market, it remained around the 90th place in sales ranking (iOS basis). Lineage M, which faced a boycott movement, also performed poorly. Its first-quarter sales are estimated at 194.7 billion KRW, down about 8.2% year-over-year.

According to big data platform IGAWorks, the monthly active users (MAU) of 'Lineage M' on Android last month were 187,822, down about 25% from 233,937 the previous month. Lineage 2M also saw its MAU drop by about 11% to 85,053 last month compared to the previous month. Considering that both games are not affected by seasonal factors, it is evaluated that the boycott movement by users following the 'Munyang' update, a major monetization element in January, had a significant impact.

Since the compensation for the Munyang update has been completed, the success of this year's most anticipated release, 'Blade & Soul 2,' scheduled for release in the second quarter, is seen as the key to a rebound in earnings and stock price. Changyoung Lee, a researcher at Yuanta Securities, predicted, "Both Lineage M and Lineage 2M have undergone updates this month, and with the release of 'Blade & Soul 2,' earnings improvement and stock price recovery are expected in the second half of the year."