Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Game stocks suffer decreased operating profits
gettyimagesbank
By Anna J. Park
By Anna J. Park
While most listed local companies have been logging shaky stock prices lately, game stocks are being hit particularly hard by uncertainties.
The stock prices of most major game companies listed either on the main benchmark KOSPI or tech-heavy Kosdaq peaked last November, and have been plummeting ever since.
Krafton, the country's largest game company by market cap, saw its stock price hit 277,500 won on Wednesday's closing, a drop of more than 50 percent from its peak intra-day trading price of 580,000 won ($484) logged just three months ago in November.
The situation is also similarly dire for NCSOFT, Korea's second-largest game developer. The company's stock price has been on a general losing trend for the last year, despite some fluctuations. After logging the highest intra-day trading price of 1,048,000 won last February, the company's stock price fell to 492,500 won on Wednesday's closing, a 4 percent fall from the previous day.
Their falls are particularly painful, given that both the KOSPI and Kosdaq finished bullish on Wednesday, rising by 1.99 percent and 4.55 percent at closing, respectively, as concerns over Russia-Ukraine tensions somewhat subsided. Only three companies ― Krafton, NCSOFT and S-Oil ― among the KOSPI's top 50 finished with a lowered stock price on Wednesday's closing.
On the other hand, Kosdaq-listed game companies like Wemade, Pearl Abyss and Kakao Games finished with strong gains on Wednesday, rising by 12.06 percent, 8.95 percent and 4.37 percent, respectively. However, the general losing trend of their stock price movements is similar to larger game developers like Krafton and NCSOFT.
The stock price of Wemade, for example, peaked at 245,700 won in November. Since then, it has been on a steep decline, despite daily fluctuations, logging a fall of more than 50 percent from its peak price.
Kakao Games' stock price pattern is also similar, although the game company's falling rate has been slightly less severe than its peers. The stock fell by nearly 40 percent from its intra-day trading peak of 116,000 won logged in November. Pearl Abyss' stock price fell by some 30 percent from its November peak.
Experts view that the game companies' dissatisfying earnings have been a key factor in their losing price pattern over the past few months. NCSOFT and Netmarble, both KOSPI-listed game companies, maintained an annual revenue of some 2 trillion won last year, yet their operating profits plummeted by 54.5 percent and 43.2 percent year-on-year, respectively.
NCSOFT's performance particularly disappointed investors, falling by about seven percent at the start of Wednesday's trading session. The game company released last year's earnings on Tuesday, showing that its net profit fell to 395.8 billion won in 2021, a 32.54 percent fall from 2020.
Krafton's 2021 operating profit also logged a 17.3 percent fall. The company recorded 1.8 trillion won in annual revenue last year, a 12.9 percent jump from the previous year, yet its operating profit dropped due to increased costs for marketing and other reasons.
Mid-sized game developers Pearl Abyss and Com2uS also saw their operating profits last year plunge by 72.6 percent and 53.8 percent, respectively. Kakao Games and Wemade were exceptional in that their operational profits as well as annual revenues soared last year, thanks to the success of their games.
Market analysts explained that one of the core reasons behind the boom in the game industry's stock prices as well as earnings in 2020 was the sudden lockdowns caused by the pandemic. The sudden increase in time spent at home translated into soaring time and money spent on playing games, thereby boosting game stock prices. Yet, that driving force had been slowed last year, resulting in a general fall in operating profits. Also, the failure of some of the firms' new games to take off has also wreaked havoc on their stock prices.
The game companies' active participation in exploring new technological areas, such as blockchain, NFTs, cryptocurrencies and metaverse, might lead to growth momentum in the future. Nonetheless, the outlook is still uncertain, and is not likely to have a direct effect on profitability in the near future.