[Click eStock] "No Reason for Netflix Stock to Fall Despite Price Drop"

[Asia Economy Reporter Junho Hwang] Daishin Securities maintained the target price of Studio Dragon at 130,000 KRW on the 12th. Although Studio Dragon's stock price was affected by the decline in Netflix's stock price, the concern over contraction in content investment is not significant.

Studio Dragon achieved high performance in the first quarter of this year despite a relatively small lineup. Sales amounted to 1.2 trillion KRW, a 3% increase compared to the previous year, and operating profit recorded 18.1 billion KRW, a 1% increase during the same period.

Daishin Securities analyzed that quarterly operating profit continues an upward trend due to the expansion of production scale and the establishment of the studio system. In particular, it is expected to maintain an average of 17 to 18 billion KRW per quarter this year, and if highly profitable works such as tentpole and OTT original productions are scheduled, operating profit in the 20 billion KRW range is also possible. Studio Dragon's operating profit rose from about 11 billion KRW in 2019 to around 15 billion KRW in 2020-2021.

Daishin Securities noted that Studio Dragon's stock price also fell following the recent decline in Netflix's stock price, but they see no reason for Netflix's stock price drop to affect Studio Dragon. Netflix's stock price fell due to a net loss of subscribers in the first quarter and a decrease in subscriber outlook for the second quarter this year. As a result, the stock prices of Korean content sectors, including Studio Dragon, recently declined together.

Kim Hee-jae, a researcher at Daishin Securities, stated, "Although Netflix's subscribers decreased, sales, profits, and ARPU increased, and due to measures such as preventing account sharing and raising fees, subscriber defense, net subscriber growth, and sales increase can be continuously demonstrated, so there is no need to worry about contraction in content investment," he said. He added, "the value of Korean content companies, which are popular not only in Asia but also in the global market, is inevitably increasing."