Why Is CJ ENM's Stock Still Sluggish Despite TVING Ranking Second After Netflix? [Weekend Money]

CJ ENM's Q2 operating profit expected at 27 billion won, falling short of expectations
TV advertising slump weighs despite TVING's growth
Samsung Securities lowers target price by 34% to 47,000 won

The homegrown online video service (OTT) "TVING" is growing. However, shares of CJ ENM remain sluggish. While the digital business continues to show growth potential, the company is being held back by weak traditional TV advertising and delayed recovery in its content business.

Samsung Securities set a target price of 47,000 won for CJ ENM, citing these factors. Although it maintained its "Buy" investment rating, this is a 33.8% cut from the previous target of 71,000 won set on May 11, just two months ago.

CJ ENM's second-quarter results this year are expected to show sales of 1.3062 trillion won and operating profit of 27 billion won. Compared to the same period last year, this represents a 0.5% decrease in sales and a 5.5% decline in operating profit. The operating profit is also projected to fall short of the market consensus of 34.4 billion won.

The positive aspect lies with TVING. The success of original content, the effect of the Korea Baseball Organization (KBO) season, and expanding partnerships are expected to help profits reach the break-even point. As of last month, TVING had 9.697 million monthly active users (MAU) in Korea, maintaining its position as the second-largest OTT platform after Netflix. TVING also set a goal of 100 billion won in ad sales for this year. However, the outlook is not entirely rosy. The impact of the personal information leak that occurred early last month on subscriber metrics remains to be seen for the time being.

TV advertising is also a drag on performance. Second-quarter TV ad revenue is expected to fall by 19.2% year-on-year. Even as TVING grows, it will take more time to fully offset the weakness in the company's traditional media platform business.

The recovery in the film and drama segment is also slow. In the second quarter, Fifth Season, the U.S. content studio acquired in 2022, delivered only three films and dramas, and the lack of highly profitable series deliveries is expected to result in continued losses. In the music segment, the expansion of proprietary artist IP is positive, but profitability is likely to decline due to investments related to Mnet Plus and the costs of debuting new artists.

Choi Minha, a researcher at Samsung Securities, commented, "The growth trend centered on digital businesses such as TVING remains valid, but the pace of recovery in advertising and content businesses is the key issue."

This content was produced with the assistance of AI translation services.