[This Week's Hot Stock] NCSOFT: Time for a Comeback After Three Years of Sluggish Performance

Aion 2's Early Success and Anticipation for Lineage Classic
Visible Results from New Titles Raise Hopes for a Performance Turnaround

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NCSOFT is signaling a comeback. With the success of the game Aion 2 and the upcoming releases of new titles such as Lineage Classic, expectations are rising for a rebound following a prolonged period of sluggish performance. The securities industry is also forecasting that NCSOFT could achieve growth of over 30% this year compared to the previous year.

The Aftermath of the Lineage Series Sequels' Poor Performance Was Significant

According to the financial investment industry on January 21, NCSOFT's share price rose from 191,300 won on November 21 last year to 235,500 won on January 19 this year. This represents a 23.10% increase during this period.

NCSOFT has experienced fluctuations in its performance. Revenue, which stood at 2.5718 trillion won in 2022, dropped to 1.7798 trillion won in 2023 and further to 1.5781 trillion won in 2024. The estimated revenue for last year, as projected by securities firms, is 1.5359 trillion won-a 2.67% decrease from the previous year. The share price, which exceeded 1 million won in 2021, has also fallen to the 200,000 won range.

The main reason for the poor performance is the continued decline in revenue from existing games utilizing the Lineage intellectual property (IP), such as Lineage M, Lineage 2M, and Lineage W. As these games have aged over several years, it has become difficult to attract new users, and both the inflow of existing users and revenue have decreased. In addition, new titles that had generated high expectations failed to meet market expectations. For example, both Blade & Soul, released in August 2021, and Hoyun, released in August last year, are now facing service termination.

NCSOFT's estimated revenue and operating profit for the fourth quarter of last year are 432.4 billion won and 13.1 billion won, respectively. Compared to the same period the previous year, revenue increased by 5.62%, and the company returned to profitability. This marks a rare year-on-year improvement on a quarterly basis. However, market expectations are expected to be missed. Kim Dongwoo, a researcher at Kyobo Securities, stated, "Fourth-quarter results for last year are expected to fall short of market expectations. While Aion 2 is showing initial results in line with market estimates, the deferral of membership and certain payment revenues to the first quarter of this year is expected to cause a consensus miss."

This Year: Anticipation for Aion 2's Performance and Lineage Classic

However, the situation is expected to reverse starting this year. The securities industry predicts that the three-year slump will come to an end. According to FnGuide, the securities industry projects NCSOFT's revenue and operating profit for this year at 2.0063 trillion won and 360.5 billion won, respectively. This represents a 30.71% increase in revenue and a 1,360.60% increase in operating profit compared to the previous year.

First, the performance of Aion 2 is positive. Despite its user-friendly business model (BM), Aion 2 has achieved solid results. It recorded 1.5 million daily active users (DAU) at launch, 25 billion won in revenue in the first seven days after launch, and 100 billion won in 46 days. Kyobo Securities forecasts that Aion 2 alone will generate 426.4 billion won in revenue this year.

Kim Jihyun, a researcher at Shin Young Securities, commented, "In the absence of new PC MMORPG titles, the user concentration on Aion 2 is expected to continue. Live broadcasts for balance patches and user communication are also positive, especially for attracting users in their 20s and 30s."

Various new titles are also anticipated this year. NCSOFT is expected to release new games such as Time Takers, Cinder City, and Breakers. In particular, the upcoming launch of Lineage Classic next month is key. Lineage Classic is a new title that recreates the original version of NCSOFT's flagship IP, Lineage.

Researcher Kim Dongwoo emphasized, "Lineage Classic, scheduled for release on the 11th of next month, has received positive responses in two rounds of pre-character creation. The regional expansion of Lineage Classic and the existing mobile lineup will help fill the momentum gap." He added, "This year, profit normalization is expected thanks to reduced fixed costs and a lower variable cost ratio following workforce reductions over the past two years, as well as the performance of new titles."