On January 25, Korea Investment & Securities recently adjusted its target stock price for SM Entertainment, reducing it from 167,000 won (125 USD) per share to 150,000 won (112 USD) per share. This revision was based on the expectation that SM Entertainment's 2023 fourth-quarter performance did not meet market forecasts.
Researcher Ahn Doyoung, in a report issued on the same day, predicted that SM Entertainment's operating profit for the fourth quarter would reach 28.4 billion won (21.2 million USD), which is lower than the anticipated 34.8 billion won (26 million USD). Ahn explained that this shortfall was due to a less active quarter with fewer artist comebacks and performances, especially compared to the third quarter that saw numerous comebacks from boy groups.
A significant factor in this underperformance, according to Ahn, was the lower-than-expected sales of aespa and Red Velvet's albums, which sold 1.26 million and 600,000 copies, respectively.
Despite this, Ahn noted that the recent decline in the company's stock price, which stemmed from concerns about its performance, was excessive. He emphasized that the value of SM Entertainment's intellectual property (IP) extends beyond just album sales.
Ahn highlighted the company's substantial potential for monetization in other areas, including streaming, live performances, and merchandise sales.
Maintaining a 'buy' investment recommendation, Ahn pointed out the attractiveness of SM Entertainment's current valuation. He cited the company's current estimated 12-month trailing P/E ratio (price-to-earnings ratio) as 16 times, underscoring its value attraction is very high.
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Red Velvet is a 9 year old group from the 3rd gen, of course it’s not realistic to expect them to be million sellers. 600K is not a small number. Not long ago 500K seemed impossible to achieve for a girl group. SM barely bothered to promote the new album! Also it’s quite hypocritical that SM has like 18 NCT units and other boy groups yet people are blaming the two girl groups, that got four releases combined last year (two minis and an English single for aespa, a full album from Red Velvet) as the ones responsible??? Bffr.
oh and before I forget, how tf are aespa and red velvet responsible for fixing the company stocks when their shady deals and family drama-mamama have become public news for the greater part of 2023?
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