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 domestic online video service (OTT) "Tving" is growing. However, the share price of CJ ENM has continued to stagnate. While the digital business still shows growth potential, sluggish traditional TV advertising and the delayed recovery of the content business are holding the company back.

Samsung Securities set CJ ENM's target share price at 47,000 won under these circumstances. The investment opinion of "Buy" was maintained, but this is a 33.8% reduction from the previous target of 71,000 won set just two months earlier on May 11.

CJ ENM's second-quarter results for 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, sales are expected to decrease by 0.5% and operating profit by 5.5%. Operating profit is also projected to fall short of the market consensus of 34.4 billion won.

The positive factor is Tving. The success of original content, the effects of the Korea Baseball Organization (KBO) season, and expanded partnerships are expected to improve profits to the break-even point. As of last month, the monthly active users (MAU) of Tving, among domestic OTT platforms, reached 9.697 million, maintaining second place after Netflix. Tving's advertising revenue target for this year has also been set at 100 billion won. However, not all the outlook is rosy. The impact of the personal information leak that occurred early last month on subscriber metrics will need to be monitored for some time.

TV advertising is also holding the company back. Second-quarter TV advertising revenue is expected to decrease by 19.2% compared to the previous year. Even with improvements in Tving, it will still take time to fully offset the sluggish performance of the existing media platform business.

The recovery in the film and drama segment is also slow. For the American content studio Fifth Season, which was acquired in 2022, only three films and dramas are scheduled for delivery in the second quarter, and the absence of deliveries for highly profitable series is expected to result in continued losses. In the music segment, the expansion of in-house artist IP is positive, but investments related to Mnet Plus and the costs of debuting new artists are expected to lower profitability.

Choi Minha, a researcher at Samsung Securities, commented, "The growth led by digital businesses such as Tving remains valid, but the speed of recovery in advertising and content businesses is the key factor."

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