BLACKPINK’s Impact: YG Entertainment’s Earnings Forecast Dips, Target Price Lowered

The fourth quarter performance of YG Entertainment (122870) has fallen short of market expectations, and future performance is expected to fluctuate depending on the activities of BLACKPINK.

Hana Securities revised its operating profit outlook for YG Entertainment, assuming changes in BLACKPINK’s activities, on the 4th to about $37 million in 2024 and about $67 million in 2025. As a result, the target stock price was lowered by 18% to about $48 as of 2025.

YG Entertainment’s fourth-quarter sales were about $82 million, a 12% decrease from the previous year, and operating profit fell 98% to about $300,500, significantly missing the consensus. It is estimated that the subsidiary YG PLUS performed worse than expected. Although BABYMONSTER debuted, there were no album comebacks, and the assessment is that MD sales were decent, reflecting TREASURE’s Korea and Japan tours.

“In the first quarter, artist comeback activities will be limited due to BABYMONSTER’s single comeback, but in the second quarter, the comeback of TREASURE and BABYMONSTER’s albums and 22 Asian tours including TREASURE’s first half of Japan’s arena and dome will be reflected,” predicted Lee Ki Hoon, a researcher at Hana Securities.

Recently, the largest shareholder purchased about 462,000 shares (about $15 million) at about $31.5~$33, which is judged to infer high confidence in BABYMONSTER, not only because the stock price has fallen significantly.

“If such expectations are realized where the performance and stock price dependence on a single IP has increased, both performance and valuation can be significantly normalized,” said Researcher Lee Ki Hoon. “There are also plans for a regular album in the fall, so a fast comeback in the early debut will continue.”

However, high volatility is expected depending on the presence or absence of BLACKPINK’s activities.

BLACKPINK is expected to repeat large-scale tours and long hiatuses. The original 2024 performance forecast assumed a comeback before the Olympics. Still, suppose it is believed that a comeback in the fourth quarter will be followed by a world tour in 2025 and a comeback in 2026. In that case, the annual performance volatility is expected to increase depending on the presence or absence of BLACKPINK’s activities.

“As BLACKPINK’s performance dependence is high, the stock price is also likely to repeat similar fluctuations,” said Researcher Lee Ki Hoon. “To solve this, BABYMONSTER that A Hyeon joined needs to be strong enough to break the strong competition structure of female idols.”