Blackpink's Comeback Next Year... Will YG's Stock Revive?

Expectations for Earnings Growth Next Year
Brokerage Firms Raise Target Price for YG Entertainment

The transition to a deficit in the third quarter this year has led securities firms to unanimously raise their target prices for YG Entertainment. This is due to expectations that earnings will improve next year as Blackpink, Treasure, Baby Monster, and 2NE1 resume activities. Attention is focused on whether the anticipation of earnings growth next year will boost YG Entertainment's stock price, which has been in a prolonged slump.

On the 11th, Hana Securities raised YG Entertainment's target price from 49,000 KRW to 53,000 KRW. In the third quarter of this year, YG Entertainment recorded sales of 83.5 billion KRW, down 42% from the previous year, and an operating loss of 3.6 billion KRW. The operating loss exceeded the average market forecast (-7.9 billion KRW). Lee Ki-hoon, a researcher at Hana Securities, explained, "The issue was more about costs than sales. We expected the production costs for the recently returned Baby Monster to be reflected in the third quarter, but they will be accounted for in the fourth quarter."

Despite the poor performance in the third quarter, the target price was raised due to the expectation that earnings will improve starting next year as major artists like Blackpink resume activities. Researcher Lee Ki-hoon analyzed, "Although the annual deficit trend is expected to continue this year, the prolonged decline in album releases has come to an end, and the market is preemptively reflecting Blackpink's comeback next year in the stock price."

Yujin Investment & Securities also raised YG Entertainment's target price from 48,000 KRW to 52,000 KRW, stating that although artist activities were sparse this year, next year will be a prosperous one. Researcher Lee Hyun-ji of Yujin Investment & Securities emphasized, "Although Baby Monster debuted less than a year ago, their world tour is scheduled to start in the first half of next year, and the long-awaited comeback of Treasure is also planned for next year. Additionally, the second half of next year will see Blackpink's comeback and a large-scale world tour, and preparations are underway for the debut of a new rookie boy group at the end of the year."

NH Investment & Securities also raised the target price by 20% to 60,000 KRW, expecting a definite turnaround for YG Entertainment, while Samsung Securities raised the target price from 47,000 KRW to 56,000 KRW.

According to a summary of securities firms' analyses, considering the activity schedules of YG Entertainment's artists this year, an annual operating loss seems unavoidable. However, from next year, major artists and next-generation stars are expected to be active together, and the dominant opinion is that definite earnings growth will be achieved.

Choi Min-ha, a researcher at Samsung Securities, said, "Considering the cumulative performance up to the third quarter and the artists' activity schedules in the fourth quarter, it seems difficult to avoid an annual operating loss this year," but added, "I believe the foundation for growth to be shown from next year has been firmly established."

Despite the rosy outlooks pouring out that day, the stock price declined. YG Entertainment closed at 43,300 KRW, down 2.04% (900 KRW) from the previous trading day. The stock price ended a six-day consecutive rise from the 1st to the 8th and turned downward. YG Entertainment's stock price recorded a closing price of 95,200 KRW on May 30 last year. Due to poor performance and delayed generational change after Blackpink, the stock price has been fluctuating between 30,000 and 40,000 KRW since the beginning of this year.