Although the KOSPI has surged more than 80% this year, the entertainment sector has instead been sliding across the board. Analysts in the securities industry advise that entertainment stocks have now entered a zone of excessive undervaluation relative to corporate value and say investors should watch for a rebound in the second half.
According to the Korea Exchange (KRX) on Jun. 10, HYBE's share price has fallen by nearly 40% this year (Jan. 1–Jun. 9). Over the same period, YG Entertainment (-36%), SM Entertainment (-28%), and JYP Entertainment (-14%) have also been weak across the board.
A key reason for the broad weakness in entertainment names is the concentration of funds into artificial intelligence (AI) semiconductor stocks. Lim Su-jin, an analyst at Kiwoom Securities, said, "Amid a market environment shaped by fund flows concentrating in specific growth sectors such as semiconductors and AI, together with geopolitical risks, share prices have been sluggish."
Company-specific negatives also weighed on prices. HYBE briefly topped 400,000 won early in the year on expectations for BTS to resume full-group activities, but expectations for strong performances eased after the Gwanghwamun concert in March, and the stock plunged 15% in a single day. After that, legal risk surrounding Chair Bang Si-hyuk acted as a discount factor. At YG Entertainment, concerns arose about growth engines as no clearly defined next-generation IP has stood out after Blackpink.
Still, the securities industry says current price levels are excessively low. Lee Ki-hoon, an analyst at Hana Securities, said, "Even versus the historical troughs formed during past sector crises such as the ban on the Korean wave, No Japan, the Burning Sun scandal, and the NewJeans dispute, the current price-earnings ratio (PER) is more than 30% lower."
There are also forecasts that momentum for a share-price rebound will strengthen in the second half alongside an industry upturn. For HYBE, the resumption of BTS's global world tour is expected to lead to stadium tours in North America, Europe, South America, and Southeast Asia, as well as expanded MD (goods) sales. New IP such as Cortiz and KATSEYE is also said to be sustaining growth in album sales and digital performance.
SM Entertainment will begin its third world tour with aespa's concert at Seoul Gocheok Sky Dome in August. Analyst Lim said, "On the back of second-quarter comebacks by major artists such as aespa and RIIZE and an expansion of global tours, strong results are expected," adding, "Downside for the share price should be solid." However, the analyst added, "For a medium- to long-term recovery in the share price, not only growth in new IP but also expanded monetization of older IP is needed."
For YG Entertainment, whether it can enter a new IP growth trajectory through Big Bang's third-quarter comeback and the launch of a new boy group is seen as the key point to watch. For JYP Entertainment, growth in concert revenue centered on TWICE and the announcement of Stray Kids' world tour are expected to act as catalysts for the share price. Expansion of the MD business, including popup stores and character collaborations, is also being seen as a new growth driver.