Both New Releases and Existing Titles Struggle... Game Stocks Stuck in a Slump

Q2 Game Company Earnings Mostly Down Year-on-Year
Stock Prices Hit Yearly Lows... Earnings Outlook Also Gloomy

Game stocks such as NCSoft, Kakao Games, and Netmarble continue to struggle in a slump. Both existing titles and new releases have failed to gain popularity, resulting in the worst period in terms of both performance and stock prices.

On the 18th, NCSoft closed trading at 250,000 KRW. During the day, it dropped to as low as 242,500 KRW, marking the lowest point of the year. The closing price represents a 44.20% decline compared to the end of last year. The stock prices of Kakao Games and Netmarble also fell by 37.85% and 26.99%, respectively, compared to the end of last year.

The decline in game stocks is attributed to worsening earnings as both existing titles and new releases underperform. NCSoft, the leading stock, reported Q2 revenue and operating profit of 440.2 billion KRW and 35.3 billion KRW, respectively, down 30% and 71% year-over-year. Looking in detail, mobile game revenue decreased by 38% and PC game revenue by 8% compared to the same period last year, reflecting a decline in performance. Jung Eui-hoon, a researcher at Eugene Investment & Securities, explained, "In addition to the decline in revenue from existing titles, the momentum has stalled due to significant delays in new game release schedules."

The situation is similar for other game companies. Netmarble’s Q2 revenue was 603.3 billion KRW, with an operating loss of 37.2 billion KRW. Revenue slightly decreased year-over-year, and operating losses continued. Kakao Games recorded Q2 revenue of 271.1 billion KRW and operating profit of 26.5 billion KRW, down 20% and 67.3%, respectively, compared to the same period last year. Krafton also posted revenue of 387.1 billion KRW and operating profit of 131.5 billion KRW. Like other game companies, both revenue and operating profit declined.

Due to poor earnings, securities firms are lowering their investment ratings on game companies. Samsung Securities and Daol Investment & Securities downgraded NCSoft’s investment rating from Buy to Hold. Additionally, Daishin Securities and Eugene Investment & Securities lowered their ratings on Kakao Games to Market Perform and Hold, respectively. Meritz Securities and Shinhan Investment Corp. also downgraded Netmarble’s rating to Hold.

The securities industry expects it will be difficult for game companies to rebound in earnings. Delays and gaps in new releases continue, and the performance of newly launched games is also lackluster. Kim Ha-jung, a researcher at Daol Investment & Securities, said, "The combination of poor performance of existing titles and the absence of new release effects leads to a negative outlook for future earnings," adding, "Currently, the Korean game industry needs breakthroughs such as new technologies."