[Click e-Stock] "Pearl Abyss: Investor Confidence Shaken by New Title Delay... Investment Rating and Target Price Lowered"

Investment Rating Downgraded from "Buy" to "Hold"
Target Price Lowered from 52,000 Won to 33,000 Won

On August 14, NH Investment & Securities downgraded its investment rating on Pearl Abyss from "Buy" to "Hold," and lowered its target price from 52,000 won to 33,000 won, citing a loss of investor confidence due to the delayed release of the new title "Crimson Desert."

Ahn Jae-min, a researcher at NH Investment & Securities, explained, "Taking into account the delay in the release of Crimson Desert, we have reduced our earnings estimates for 2025 and beyond, and in light of the lost confidence, we have also lowered the target price-to-earnings ratio (PER) from 20 times to 17 times."

The previous day, during its second-quarter earnings conference call, Pearl Abyss announced that the release of Crimson Desert would be postponed to the first quarter of next year. The release schedule for Crimson Desert has been repeatedly pushed back: initially from the first half of 2024 to the second half, then from the second half of 2024 to 2025, and once again from 2025 to 2026. Ahn noted, "As the release date continues to be delayed, confidence in the actual launch timing has significantly declined. Of course, delays can occur due to the nature of game development, but in the case of Pearl Abyss, the frequency of delays has been excessively high. Therefore, uncertainty will persist until the release date is finally confirmed."

It is expected that operating losses will be inevitable until the new title is launched. In the second quarter, Pearl Abyss reported revenue of 79.6 billion won, down 2.7% year-on-year, and an operating loss of 11.8 billion won, continuing its deficit. Ahn stated, "This performance fell short of market consensus (the average forecast by securities firms). While revenue continues to decline due to the aging of the Black Desert intellectual property (IP), advertising and promotional expenses have increased as a result of attending game shows related to the launch of Crimson Desert." He added, "In the third quarter, costs are expected to rise further, as the company is scheduled to participate in Gamescom and the Tokyo Game Show."