Netmarble Has Started Making Money, But Why Can't Its Stock Price Rise? [Weekend Money]

Successive Flops for New Releases in the First Half

Second Quarter Operating Profit Halved Year-on-Year

Game Industry Expectations Continue to Drop

"Major IP Titles and Multiplatform Strategy Must Deliver Results"

Netmarble has started posting profits again, and cost-cutting measures are now showing results. Yet, the stock price remains listless. The reason is simple: expectations for new releases— the primary factor driving game company stock prices— have diminished.

On August 9, Shinhan Investment & Securities lowered its target price for Netmarble by 37.6% to 58,000 won due to this background. The 'buy' investment rating was maintained. On the surface, the buy recommendation remains, but expectations have been significantly downgraded.

Judging by second-quarter results alone, the outcome was not bad. Netmarble recorded sales of 749.2 billion won in the second quarter, up 4.4% compared to the same period last year and 15.0% from the previous quarter. Operating profit stood at 80.1 billion won, a 50.8% increase quarter-on-quarter but down 20.8% year-on-year. This is also far short of the market consensus of 86.1 billion won.

The real issue lay in the performance of major new releases. "Monster's Journey: Star Dive," launched in April, fell far short of market expectations, and although "The Seven Deadly Sins: Origin" emphasized multi-platform availability and content sustainability, sales are declining rapidly.

“SOL: Enchant,” released in June, did take the top spot in domestic sales rankings and achieved an average daily sales figure of 1.7 billion won over the first 13 days after release. However, what investors had hoped for was not the solid performance of one or two mid-sized titles, but a definitive smash hit from a major IP.

New titles are also scheduled for the second half of the year. Netmarble plans to launch three titles: “Solo Leveling: Karma,” “Shangri-La Frontier,” and “Project Aegis.” Among these, Shinhan Investment & Securities predicts that “Shangri-La Frontier” will generate the highest sales, with average daily sales estimated at around 800 million won.

Nonetheless, expectations are not what they used to be. This is because the launches of "Evil Vein" and "Project Octopus" are presumed to have been delayed, and recent underperformance by major titles has eroded market confidence in the success rate of new releases. Compared to when "Ni no Kuni: Cross Worlds" posted daily sales exceeding 2 billion won upon launch in the past, expectations have clearly lowered.

Ultimately, the key for Netmarble's stock price is not profit margins, but regaining confidence. Game companies may recover profitability by cutting costs, but if the growth rate declines, valuation falls in tandem. Shinhan Investment & Securities applied a target price-earnings ratio (PER) of 10 times on this basis.

Sukkyoon Kang, Senior Researcher at Shinhan Investment & Securities, explained, "Due to underperformance of new releases in the first half, delays in planned launches, and a declining hit rate, the average PER of game companies has been trending downward." He added, "With new releases such as 'The Seven Deadly Sins' and 'Monster's Journey' now facing credibility issues, the company must prove that its multiplatform strategies and new major IP titles will actually translate into results for any revaluation of its corporate value to be possible."

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