Major Downgrades Issued for Target Stock Prices of SM, YG, and HYBE

As the stock prices of K-POP entertainment companies plummet, successive downgrades to their target stock prices have been announced.

On the 13th, SM’s share price closed at 85,800 won on the KOSDAQ market. This represents a 35% drop from its peak level of 132,400 won at the beginning of this year, and it is also half of the price reached at its peak in August last year (155,100 won). Yujin Investment & Securities lowered SM’s target stock price by 18.8%, from 160,000 won to 130,000 won. Hanwha Investment & Securities set the target at 120,000 won, while Shinhan Investment & Securities assigned a target of 130,000 won.

YG Entertainment’s stock price has fallen even more sharply. It dropped by 51.3%, from 105,500 won at the beginning of this year to 51,300 won on the 13th. Hanwha Investment & Securities reduced YG’s target stock price from 90,000 won to 70,000 won and forecasted first-quarter operating profits at 17.4 billion won, which is lower than the market expectation of 20.4 billion won. The absence of BLACKPINK’s tours was cited as the main reason for this decline.

HYBE’s target stock price was lowered by 15.6%, from 450,000 won to 380,000 won. Analysts suggest that despite strong sales of BTS-related documentary content and official merchandise, rising cost ratios resulted from an increased proportion of indirect revenue dependent on external partnerships. First-quarter operating profits are expected to be 39.3 billion won, falling short of the market consensus.

JYP Entertainment’s target stock price also decreased by 9.3%, from 97,000 won to 88,000 won. Yujin Investment & Securities predicted a decline in album sales due to solo artist activities alone during the first quarter. It also pointed out that rapid development of next-generation artists is urgent amid TWICE’s contract renewal season and STRAY KIDS’ enlistment in the military.

The securities industry identifies declining album sales and worsening investor sentiment caused by the absence of key artists as common underlying factors. Despite positive developments such as BTS’s new album release and the start of its world tour, improved profitability is expected to be delayed due to upfront production costs and deteriorating cost structures.