Krafton stock cut to ‘neutral’ on bearish earnings outlook

[Source : Krafton]

Krafton Inc. shares were downgraded to ‘neutral’ from ‘buy’ and cut the target price to 16,000 won from 230,000 won by Samsung Securities Co. Thursday on the game publisher’s heavy reliance on a single asset for revenue generation.

“The company will face a further valuation decline until its single-game dependence risk is resolved,” said Samsung Securities analyst Oh Dong-hwan in a report, adding that demand for Callisto Protocol game launched at the end of last year was lower than expected.

Krafton predicted the new game title to bring cumulative sales of 5 million, but considering the current sales rankings, even 2 million won’t be easy this year, the report pointed out.

The company’s operating profit for the fourth quarter of last year is estimated to have fallen to 79.5 billion won, only half of market expectations of 161.7 billion won, due to lower-than-expected performance of Callisto Protocol and the decrease in Battlegrounds Mobile sales combined with mounting costs.

Krafton has no blockbuster release until the end of this year and this means whether or not Battlegrounds Mobile sales rebound will be the only variable to performance improvement until 2024, when Black Budget is due to be launched, Oh added.

Krafton, which went public in August 2021, peaked at 580,000 won in November the same year. The stock price has since plunged, hitting a historical intraday low of 161,500 won on Wednesday.