[Yonhap]
[Yonhap]

JYP Entertainment's share price tumbled amid weak second-quarter earnings and growing uncertainty over its key artists, as securities firms moved in quick succession to cut their target prices for the stock. Analysts cited the risk around Twice's contract renewals and the prospect of Stray Kids members enlisting in the military in sequence as factors that could weigh on earnings over the medium to long term.

iM Securities on Friday lowered its target price for JYP Entertainment from 80,000 won ($57) to 60,000 won, while maintaining its "buy" recommendation.

"Twice has entered its contract renewal season, and news of individual contract changes for some members is emerging," Hwang Ji-won, an analyst at iM Securities, said in a report Friday. "There is a possibility that the share of solo activities will increase going forward," he added, saying the firm was assuming group activities on a more conservative basis than the previous year.

Twice is JYP Entertainment's flagship long-running group and one of its most important artists, with a global fandom. Concerns about the frequency of future group activities have grown after member Jeongyeon announced she would not renew her contract, followed by reports that Chaeyoung has also indicated she intends to leave JYP. Both members have said, however, that they will continue to participate in Twice's activities.

The prospect of Stray Kids members enlisting in the military is also seen as a risk factor. "Given the likelihood of Stray Kids members enlisting sequentially within the next two years, accelerating revenue growth from younger groups to minimize the gap will be critical," Hwang said, raising the possibility that the company's earnings could shrink going forward.

JYP Entertainment shares closed Thursday on the Kosdaq at 40,850 won, down 11.20 percent from the previous session — a year-to-date closing low, having started the year in the 70,000-won range. The broader entertainment sector was already under pressure as investment flowed toward large-cap semiconductor stocks such as Samsung Electronics and SK Hynix, and JYP Entertainment's decline was amplified by the combination of weak earnings and artist-related uncertainty.

JYP Entertainment had earlier disclosed that its second-quarter consolidated operating profit fell 41.4 percent year on year to 31 billion won, missing the market consensus by about 18 percent. Sales for the same period came in at 183.1 billion won, down 15.1 percent, while net profit dropped 40.3 percent to 21.7 billion won.

Other brokerages also trimmed their outlooks. SK Securities cut its target price for JYP Entertainment from 75,000 won to 66,000 won. "Stray Kids' military enlistments and uncertainty over Twice's contract renewals are a burden on medium- to long-term earnings," said Park Jun-hyung, an analyst at SK Securities, adding that the possibility of longer gaps between Twice's activities and comebacks compared with the past should be factored in.

Meritz Securities lowered its target to 65,000 won from 79,000 won, NH Investment cut its target to 69,000 won from 83,000 won, and Hana Securities set a target of 58,000 won.

Some analysts noted, however, that Stray Kids' current sales momentum remains solid. "The group will hold its own festival, 'Stray City,' in three South American cities in September and headline a major Brazilian festival," Hwang said. "By diversifying its activity regions to include Latin America, the group is broadening its fandom base and improving profitability through non-Asian revenue growth, even at a relatively senior stage of its career."

Expansion of the intellectual property business is another point to watch. "As the group rolls out character pop-ups globally and strengthens licensing revenue, a significant earnings contribution is expected," Hwang said. "It will be worth watching whether Stray Kids' precedent extends to other artists."

As JYP Entertainment's share price has fallen, past remarks by the company's chief creative officer, Park Jin-young, have resurfaced. Park appeared on the YouTube channel "Shukaworld" in November 2023 and said, "If I had spare money, I would definitely buy our company's stock," adding, "Now is the timing." JYP Entertainment's share price was in the 90,000-won range at the time.

Park said then that JYP's share price could fall for the next year but that he believed in the company's growth potential three or five years out. Park currently holds a 15.37 percent stake in JYP Entertainment.

JYP Entertainment once commanded high growth expectations on the back of Twice's expanding global activities and Stray Kids' Billboard chart performances, but the stock now reflects both the broader neglect of the entertainment sector and concerns about slowing earnings. Analysts say the key variables for any share price recovery will be how effectively the company narrows the gap left by its established lead artists and how quickly it can build new revenue streams from younger groups and its intellectual property business.


rainbow@heraldcorp.com