Korea Investment & Securities Co. on the 26th cut its investment rating on KOSDAQ-listed SOOP (formerly AfreecaTV) to "neutral" from "buy." It said growth in the platform business that had driven earnings is now limited as the slowdown in Korea's personal broadcasting market has become reality, compounded by falling traffic and intensifying competition. It did not provide a target price.
Jung Ho-yoon, an analyst at Korea Investment & Securities Co., said the slowdown in platform business growth is materializing faster than expected. The growth rate of SOOP's platform division fell to the single digits starting last year and declined 12.8% on-year in the first quarter. The firm said a combination of factors, including the personal broadcasting market's own growth slowdown, decreasing platform traffic, and fiercer competition in some content categories, has had an impact.
Jung said, "The slowdown in the platform division's growth rate is materializing," and added, "In April we again allowed in-app payments on Android and iOS, but as platform fees were reflected, the price of 'Star Balloons' also rose, making it hard to be optimistic about the effect."
Until now, SOOP expanded its results more on rising average revenue per paying user (ARPPU) than on an increase in user numbers. As ties between streamers and users strengthened and content competitiveness improved, users' support amounts also grew.
But this growth method is also seen as having reached its limit. As the personal broadcasting market enters a mature phase and rival platforms such as CHZZK and YouTube Live expand quickly, further user growth will not be easy. The average monthly ARPPU is already at the level of popular MMORPGs, limiting room for further increases.
Jung said, "It is now difficult to be confident about the growth potential of the domestic personal broadcasting market," adding, "After traffic growth stalled, ARPPU increases drove growth, but that too has reached its limit."
Valuation has fallen sharply, but there is said to be a lack of growth drivers to raise the investment view. Based on this year's estimated results, SOOP's price-earnings ratio (PER) is around 5.3 times, much lower than in the past, but the lack of visible results in overseas business is cited as a burden.
Jung said, "The Southeast Asia business, which we began pushing in earnest last year, still has not shown meaningful results," adding, "Until overseas business performance is confirmed, a conservative approach is necessary."