With BLACKPINK’s group activities having uncertainty, securities firm Daeshin Securities adjusted the target price for YG Entertainment on January 22, lowering it from 90,000 to 65,000 won, saying that they anticipate an inevitable decline in YG earnings in 2024. However, the firm maintained a “Buy” investment recommendation, citing valid expectations for new talent.
In the fourth quarter of last year, YG Entertainment estimated a 28.8% decrease in revenue compared to the same period the previous year, amounting to 890 billion won. The operating profit was also estimated to have decreased by 60.9%, reaching 61 billion won. The operating profit is expected to fall 32.5% below consensus.
The decline in YG’s performance is attributed to the inactivity of artists and the costs associated with BLACKPINK’s contract renewal. The group’s collective re-contracting costs will be recognized as a fixed cost over the contract period on a quarterly basis.
This year is anticipated to be the most challenging period for YG Entertainment. Although BLACKPINK has renewed their contracts regarding group activities, which has the most significant impact on revenue, it is still difficult to predict whether there will actually be group activities within the year. Thus, the uncertainty in YG’s performance in 2024 remains significant, and from a conservative perspective, an inevitable decline in earnings is anticipated.
However, new talent may help to “restore” YG. The company’s new girl group BABYMONSTER has already formed a considerable fandom, benefiting from the fanbase effect created by BLACKPINK.
The key now lies in whether BABYMONSTER will grow. The success of future performances will largely depend on the popularity of music streams rather than album sales figures, making music streaming performance an essential investment point.
Source: Daum
