South Korean Entertainment Stocks' Target Prices Cut 13.45% on Average as Artist Costs Rise

According to FN Guide, from July 13 to July 19, South Korean brokerage firms issued 12 reports downgrading target prices for four major entertainment companies—SM Entertainment, JYP Entertainment, YG Entertainment, and HYBE—with an average decline of 13.45%. SM and JYP Ent each saw four downgrade reports, while YG and HYBE received two each.

Brokerages cited rising artist costs rather than revenue declines as the primary concern. SM's target price was cut 15.77% to an average of 105.85 million won from 128.75 million won, as higher commission rates for senior artists, increased North American promotion spending, and growing rookie artist investments are expected to outpace revenue growth. JYP Ent's target was lowered by 10.5%, with Q2 operating profit projected to fall 27.3% year-over-year to 38.5 billion won amid lower-than-expected album sales. YG Entertainment saw the steepest cuts at 16.66%, as production and promotion costs precede revenue gains from expanded activities by BABYMONSTER and TREASURE. Even HYBE, with record Q2 projected revenue of 1.27 trillion won (up 80% year-over-year) and operating profit of 146.1 billion won (up 121.6%), was downgraded 11.51% as brokerages reduced sector-wide valuation multiples.