Stray Kids’ activity gap leaves earnings in a “lean period” ... JYP target price cut 23%

[Financial News] Eugene Investment & Securities forecast that JYP Entertainment’s earnings would contract this year and cut its target price by 23.1%, from 65,000 won to 50,000 won. The brokerage said it was also concerned about a future earnings gap caused by reduced concert and album activity from Stray Kids, TWICE’s contract renewal, and some members’ military enlistments. It maintained its “Buy” rating.
“With a revenue gap from major artists approaching rapidly, strong growth from newer artists has become essential. It is somewhat disappointing that album sales by newer artists have been sluggish recently,” Lee Hyun-ji, an analyst at Eugene Investment & Securities, said on the 21st.
Eugene Investment & Securities forecast JYP’s third-quarter revenue at 219.7 billion won and operating profit at 38.4 billion won. Those figures would be down 5.6% and 5.8%, respectively, from the same period a year earlier, and operating profit was expected to fall short of the market forecast of 42 billion won.
The brokerage said that although various artists, including Stray Kids, Young K, NEXZ and NiziU, were active in the album segment, sales per artist were not high, increasing the cost burden. Some of Stray Kids’ album revenue from Western markets was expected to be deferred to the fourth quarter, in line with the practice of recognizing revenue when sales occur.
The concert segment was also expected to remain weighed down by last year’s strong results. The same period last year included both Stray Kids’ European stadium tour and TWICE’s Japan dome tour, but the brokerage forecast lower profitability this year as domestic concerts make up a larger share.
The brokerage expected the earnings slump to deepen in the fourth quarter in particular. With Stray Kids expected to hold just six concerts and release no new album, revenue was estimated to fall 34.5% and operating profit 38.9% from a year earlier. Accordingly, full-year revenue and operating profit were forecast to decline by 9.8% and 17.3%, respectively.
A gap in activity from major artists could also weigh on results next year. Stray Kids is expected to drive earnings through a stadium tour in Western markets, but a hiatus in full-group activities is anticipated in 2028 as some members’ military enlistments draw closer. TWICE is also in contract-renewal negotiations, raising the possibility that a revenue gap from major artists could begin in earnest next year, the brokerage said.
Accordingly, Eugene Investment & Securities lowered its operating-profit forecast for next year from 162 billion won to 130 billion won. It also cut its forecast for this year from 153 billion won to 128 billion won.
The key to an earnings recovery will be growth among rookie artists. NMIXX is expected to expand the regions and scale of its concerts next year following its first world tour in Western markets, while NEXZ and KickFlip are expected to begin touring in the fourth quarter of this year and next year, respectively.
“As tours by newer artists get underway, we expect the size of their fandoms to become clear in the numbers and demonstrate their growth. The debut of a new artist next year is also a potential catalyst for growth,” Lee said.
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