MERITZ Securities analyzed on the 11th that NEXON GAMES is expected to see an expanded quarterly loss due to the burden of labor costs from large-scale hiring, adjusting its investment opinion from 'Buy' to 'Sell.' The target price was also lowered by 69% from the previous 32,000 won to 10,000 won. The closing price of NEXON GAMES on the previous trading day was 13,480 won.
In the fourth quarter of last year, NEXON GAMES's revenue was projected to be 48.3 billion won, a 0.4% increase compared to the same period last year. However, it reported an operating loss of 2.1 billion won, entering into the red. Lee Hyo-jin, a researcher at MERITZ Securities, noted, "Revenue fell short of our expectations, but the poor performance led to a decrease in labor costs quarter-over-quarter, matching expected levels of loss," and added, "Both new titles, First Descendant and Blue Archive, underperformed compared to expectations."
It was anticipated that it would be difficult for the new title First Descendant released by NEXON GAMES to see a significant rebound by the first anniversary update in July of this year.
This researcher stated, "The decision made by NEXON GAMES after the update failure of First Descendant is the large-scale hiring of the Purdy team," adding, "There are currently about 100 job postings available, and additional hiring could occur. The issue is the declining revenue." It was analyzed that players have already left to anticipate a rebound for First Descendant, and the next new title is too far off. In the short term, the performance of 'Kazan,' sharing intellectual property (IP) with the next new title 'Arad,' is deemed important.
It was pointed out that while NEXON GAMES is unlikely to face liquidity issues with group support, the reverse could lead to strong influences on personnel decisions. There is an analysis stating that an increase in personnel due to large-scale hiring has entered the cash depletion phase amid the poor performance of existing new titles.
This researcher pointed out, "The issue is that the shareholders of NEXON GAMES and NEXON are different," adding, "Shareholders of NEXON GAMES need to endure short- to medium-term risks."
He further noted, "The fact that it is limited by group publishing in an industry trend where global expansion is essential also reduces its attractiveness," and stated, "To enhance attractiveness, changes in personnel-related decision-making or rebounds in existing titles are needed."