The stock price of YG Entertainment has been showing signs of weakness despite the debut of rookie girl group BABYMONSTER
Analysis suggests that YG is struggling to overcome the contract renewal issues with BLACKPINK
According to the Korea Exchange on Nov 28th, YG’s stock closed at 53,300 won, down 0.93% from the previous trading day. This marks the second consecutive day of decline.
Despite high expectations for BABYMONSTER, which debuted on Nov 27th with their debut song, the stock price is lukewarm. YG’s stock, which rose to 97,000 won last May, has recently been unable to recover from its slump. Falling to the early 50,000 won range, it has returned to the levels seen at the beginning of the year.
One of the factors expected to lead to a stock price recovery was “BABYMONSTER’s debut”, but analysis suggests that uncertainty about BLACKPINK’s contract renewal is hindering this. YG’s stock entered a downturn as reports emerged on Sep 21st that BLACKPINK members Jennie, Jisoo and Lisa were moving to different agencies. The stock fell by 13.28%, and it recorded a continuous decline for 6 trading days thereafter.
The uncertainty surrounding BLACKPINK’s contract renewal is considered to have a significant impact on the stock price due to their connection with the company’s performance. As BLACKPINK contributes significantly to YG’s performance, the absence of BLACKPINK could inevitably lead to a decline in YG’s stock.
According to financial information company FnGuide, YG’s operating profit for next year is predicted to decrease by 6.71% to 89.5 billion won compared to this year. Securities firms have adjusted their estimated operating profit for next year downward due to uncertainty about BLACKPINK.
As concerns about BLACKPINK’s contract renewal persist, securities firms are lowering their expectations for YG. Seven securities firms, including Kyobo, Samsung, Hana, Hyundai Motor, Korea Investment, Kiwoom and Hanwha, have lowered their target stock prices for YG this month.
Kim Hyun-yong, a researcher at Hyundai Securities, commented, “Considering the continued uncertainty about BLACKPINK’s contract renewal, the scale of concerts next year and the distribution of profits perceived by YG, it’s inevitable that it’ll decrease.” He adjusted the target price to 67,000 won, a 25.00% decrease from the previous level.
Ahn Do-young, a researcher at Korea Investment & Securities, explained, “There is significant uncertainty about next year’s performance related to BLACKPINK’s contract renewal. Even if the renewal is successful, there is a risk of low evaluation due to the dependence on BLACKPINK compared to competing companies.“
To rise from the slump, YG needs to kill two birds with one stone: “resolving the BLACKPINK uncertainty” and “BABYMONSTER’s great success”.
Lee Nam-soo, a researcher at Kiwoom Securities, stated, “The stock price of YG isn’t rising due to uncertainty about BLACKPINK’s contract, and it won’t recover until the success of BABYMONSTER is comparable to that of NewJeans or IVE. BABYMONSTER needs to show performance as good as NewJeans or IVE for the stock price to recover.“
