DB Securities on the 8th lowered its target price for CJ ENM, which posted an earnings shock for the first quarter of this year. It kept its investment opinion at "Buy," but cut the target price to 69,000 won from 83,000 won. CJ ENM's previous day's closing price was 51,300 won.
CJ ENM reported first-quarter revenue of 1.3297 trillion won, up 16.8% from a year earlier, and operating profit of 1.5 billion won, up 108.5%. However, it fell far short of the previous consensus (the market's average forecast), recording an earnings shock.
Shin Eun-jung, an analyst at DB Securities, said, "TV advertising revenue recorded a steep contraction, down 20.6% from a year earlier," and noted, "The media platform also posted an operating loss of 21.2 billion won."
The music unit also posted its first operating loss (-5.8 billion won), due in part to reduced activities by Lapone artists. Tving saw its amortization burden eased as the content amortization period increased to four years from two, but it recorded an operating loss of 19.2 billion won due to World Baseball Classic relay expenses and the advertising off-season.
Shin said, "Given that first-quarter advertising contracted as much as 20% from a year earlier, advertising in the second half also does not look easy," adding, "On top of that, with the World Cup in June–July, tvN, which will not carry World Cup broadcasts, is again in a disadvantageous position."
The analysis is that although CJ ENM is promoting an integrated advertising strategy across TV, Tving, digital, and out-of-home, it appears necessary to prove it with numbers.
DB Securities forecast second-quarter consolidation revenue of 1.323 trillion won, up 0.8% from a year earlier. It expected operating profit of 18.2 billion won, down 36.3%.
On the stock price, Shin analyzed, "There are concerns about business and earnings volatility, but with the recent share price continuing to fall, we judge that a considerable portion has been reflected."