Despite “slave contract” controversy with EXO Chen, Baekhyun, and Xiumin, SM Entertainment experienced growth in the stock market.
According to the Korea Exchange on June 17th, SM Entertainment closed at 117,600 won, an increase of 2,800 won (2.44%) from the previous day. During the day, SM stocks rose to 118,500 won, the highest level since March 14th (peak at 118,000 won).
From February to March, SM Entertainment faced a management dispute with HYBE and Kakao, during which its stock price rose to 158,500 won (closing price on March 8th). However, as the public takeover competition came to an end, the stock price declined again. In particular, it remained in the 100,000 won range after dropping to the 90,000 won range at the end of March.
However, on June 1st, EXO members Baekhyun, Chen, and Xiumin announced the termination of their exclusive contracts, causing the stock price to drop by 7.2% in just one day, reaching 101,800 won. This resulted in SM’s market capitalization evaporating by 190.6 billion won in a single day.
Securities analysts also expressed concerns about the uncertainty surrounding EXO’s activities. In particular, Lee Hwa Jeong, a researcher at NH Investment & Securities, adjusted SM’s estimated second-half performance and target stock price downward from 130,000 won to 120,000 won, removing all contributions from EXO-related annual performance.
However, SM Entertainment’s stock price continues to rise. This is partly due to the official statements from the members involved in the contract dispute, emphasizing that they value the EXO members and will never betray them. This positive sentiment is also attributed to the fact that there are no anticipated disruptions to EXO’s activities for their upcoming full-length album, “EXIST”.
Furthermore, SM Entertainment possesses not only EXO, but also artists such as aespa and NCT, who already have a solid fan base. They also have plans for debuting new groups, which maintains the expectation for improved financial performance.
Kim Hyun Yong, a researcher at Hyundai Securities, mentioned that aespa holds the record for the highest initial sales (1.7 million copies) among girl groups. They are also 440,000 copies ahead of the second-best record among 4th generation girl groups, which is held by LE SSERAFIM (1.26 million copies).
Kim also mentioned that in the second quarter, there are plans for NCT DoJaeJung (670,000 initial sales) and Taeyong’s solo (pre-orders of 500,000 copies), comebacks by SHINee, NCT Dream, TVXQ, aespa, and Red Velvet, as well as global tours. With 5.07 million album sales and 830,000 concert attendees, up 33% and 58% year-on-year, respectively, the two indicators are approaching all-time highs at the same time, suggesting an anticipated improvement in financial performance.
Ahn Do Young, a researcher at Korea Investment & Securities, mentioned that three new rookie groups, including a Korean boy group, a Korean girl group, and a Japanese boy group, are also scheduled to debut. He stated that since there is a strong fandom for SM Entertainment itself, the demand for SM Entertainment’s new boy groups is expected to be high.
“We expect consolidated operating profit to rise 46% year-on-year to 133.2 billion won this year, thanks to increased sales from lineup expansion and elimination of Like Planning costs”, Ahn also said.
An increase in entertainment industry performance as interest in K-pop increases is also a factor that improves investor sentiment in related stocks.
According to Hyundai Securities, the concert attendance in May reached 1.34 million, surpassing the previous record of 1.25 million set in December 2017, achieving an all-time high. In June, SM is expected to reach a total of 1 million attendees for concerts.
Meanwhile, K-pop album sales maintained steady growth with 10.7 million copies sold in May, and SM Entertainment showed the highest growth rate with 2.05 million copies sold, a 130% increase compared to the previous year, mainly due to the comeback of aespa. It is expected that SM Entertainment will achieve a total of 8.72 million copies of album sales, with album releases of NCT Taeyong, SHINee, and others.
Finally, Park Sung Kook, a researcher at KB Securities, pointed out that the biggest issues that SM Entertainment needs to address are its low exposure to the Western market and frequent delays in album and song releases.
However, Park stated that improvements can be expected if fans trust and wait, as SM Entertainment is considering various options such as acquiring Western labels and collaborating with Kakao Entertainment.
Source: News1
