CJ ENM shares sink to 29,550 won as earnings misses and data breach pile up

A scene from CJ ENM's drama series "Filing for Love"

"I won't buy anything with CJ in the name anymore." "I can't bear to watch. I'm done for now." "There seems to be no hope." "Are they actually doing any work?" — these are among the posts flooding CJ ENM's shareholder discussion board.

The descent has been relentless. CJ ENM's share price, which once reached 430,000 won, has broken through the 30,000-won floor and fallen into the 20,000-won range — close to its 52-week low. Shareholders are venting their frustration across online discussion boards.

Sluggish earnings, a content pipeline gap and a personal data breach at Tving have piled up as headwinds, keeping any hope of a share price recovery from taking hold. Brokerages have begun cutting their target prices for the stock.

CJ ENM's share price closed Wednesday down 1.99 percent from Tuesday at 29,550 won, according to Korea Exchange.

The stock had at least held the 60,000-won range at the start of this year, but slid through the 50,000-, 40,000- and 30,000-won levels in succession before crashing through the 30,000-won floor. It is now near its 52-week low of 29,450 won.

CJ ENM headquarters. [Provided by CJ ENM]

Analysts say persistent earnings weakness is the primary drag on the share price. CJ ENM posted sales of 1.33 trillion won ($962 million) and operating profit of 1.5 billion won in the first quarter — an "earnings shock" that fell short of market expectations.

Forecasts for the second quarter are little better. Samsung Securities projected CJ ENM's second-quarter operating profit at 27 billion won, down 5.5 percent from the same period last year and below the market consensus of 34.2 billion won. Hanwha Investment also forecast second-quarter operating profit at 30.4 billion won, likewise below market expectations.

The absence of a breakout blockbuster is another constraint. CJ ENM titles including "Filing for Love," "Becoming a Legend as a Cook Soldier" and "Going to Work Tomorrow Too!" gained traction through word of mouth this year, but analysts say the buzz has not been enough to lift the share price. The company's content slate — limited to just one film and three drama series — and their modest profit contribution are also cited as concerns.

The data breach at Tving adds another layer of uncertainty. The number of affected users is expected to reach at least 19 million. Depending on the outcome of the Ministry of Science and ICT's investigation, the company could face additional costs related to victim compensation.

Against this backdrop, brokerages have been cutting their target prices for CJ ENM this month. Samsung Securities lowered its target from 71,000 won to 47,000 won. NH Investment trimmed its target from 65,000 won to 47,000 won. Hanwha Investment also reduced its target into the 60,000-won range.

Choi Min-ha, an analyst at Samsung Securities, said the brokerage was "lowering its target price to reflect multiple compression across the media platform and film and drama divisions," adding that "a recovery in TV advertising and the content business — both in industry conditions and earnings — is the key variable for the share price."

Kim So-hye, an analyst at Hanwha Investment, said the sharp decline in the share price since the start of the year leaves limited room for further downside, but that an immediate rebound would also be difficult to expect.

sjpark@heraldcorp.com