The Hardships of Growth Stocks in Games and Platforms... Frequent 52-Week Lows

[Asia Economy Reporter Kwon Jae-hee] Due to the impact of the US interest rate hikes and the sharp decline in the Nasdaq, the stock prices of game and platform sectors, which are considered representative growth stocks, have been weak day after day. Compared to the peak at the end of last year, they have fallen by about 40-50%, and 52-week lows are also occurring one after another.

According to the Korea Exchange on the 22nd, Naver and Kakao both recorded intraday 52-week lows on the 19th. Right after the market opened that day, Naver fell to 266,500 KRW and Kakao dropped to 80,000 KRW, breaking their 52-week lows. On the same day, LG Household & Health Care also fell to 657,000 KRW intraday, setting a new 52-week low. In addition, LG Electronics and Celltrion also recorded 52-week lows at 101,000 KRW and 139,000 KRW respectively. This is interpreted as a ripple effect of the Nasdaq index, which is centered on US tech stocks, plunging 4.73% the previous day.

Game stocks, which play a major role in growth stocks along with platform sectors, have also been weak day after day. Since the beginning of the year, the average stock return of major game companies has been -44.77%. Although there has been a recent recovery trend, just 9 trading days ago, game stocks were hitting 52-week lows one after another. On the 10th, NCSoft fell to 396,500 KRW intraday, recording a 52-week low, and Netmarble also dropped to 85,200 KRW on the same day, setting a new low. Com2uS and Devsisters also slid to 84,600 KRW and 49,900 KRW respectively, recording new lows.

The outlook for these companies is not bright either. Interest in game stocks has decreased due to the endemic phase, and the attractiveness of growth stocks has diminished due to US interest rate hikes. Samsung Securities gave Krafton a 'neutral' investment opinion and lowered the target price by about 9% to 300,000 KRW. Especially for Netmarble, which posted an operating loss in the first quarter, Ebest Investment & Securities lowered the target price from 146,000 KRW to 105,000 KRW (28%↓), Korea Investment & Securities from 140,000 KRW to 100,000 KRW (28.57%↓), Shinhan Financial Investment from 150,000 KRW to 80,000 KRW (46.67%↓), and Samsung Securities from 140,000 KRW to 100,000 KRW (28.57%↓), consecutively lowering their target prices.

The outlook for platform companies among growth stocks such as Naver and Kakao is also the same. Seo Jeong-yeon, a researcher at Shin Young Securities, stated, "Expectations that mobility, enterprise, and entertainment sectors will contribute to corporate value recovery through listings remain valid, but reflecting the reduction in valuation premiums for platform companies, we present a target price lowered by about 17% from the previous level to 125,000 KRW." Hyundai Motor Securities also lowered Kakao's target price to 130,000 KRW.