CHICAGO, ILLINOIS – AUGUST 03: (L – R) Danielle, Hyein, Hanni, Minji and Haerin of NewJeans carry out in live performance throughout Lollapalooza at Grant Park on August 03, 2023 in Chicago, Illinois.
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It hasn’t been a straightforward begin to the yr for traders within the Ok-pop sector as decrease fourth-quarter gross sales and income, in addition to relationship scandals, hit inventory costs.
Goldman Sachs, nevertheless, expressed optimism for the trade in a March 14 report, saying the Ok-pop sector is “misunderstood.”
Shares of Ok-pop’s “big four” firms have all fallen because the begin of the yr. JYP Entertainment’s inventory has plunged over 37% yr up to now, whereas YG Entertainment shed practically 17%. Kospi-listed Hybe, dwelling of superstars BTS, noticed a smaller drop of about 4.5%.
Shares of SM Entertainment have plunged over 17%. The decline comes as one of many company’s artists was embroiled in a relationship scandal that drew widespread worldwide and home protection.
In February, the inventory fell for 5 straight periods to its lowest degree since October 2022 following the drama surrounding Karina, the chief of lady group Aespa. The sell-off wiped $50 million off SM’s market worth as Chinese followers threatened to boycott the group’s albums.
Nonetheless, Goldman Sachs mentioned it sees a “high potential for valuation re-rating,” as firms nonetheless proceed to ship multi-year earnings progress. For 2023, all 4 firms posted greater full-year income and web income.
A superior valuation metric
Goldman mentioned the sell-off is tied to markets specializing in album gross sales, which has traditionally been thought of a key proxy for the variety of followers and, by extension, prospects for the businesses.
“We challenge this mainstream mindset, arguing that offline concert audience… is the superior metric to measure the growing reach of K-pop,” the analysts wrote. They defined album gross sales may be tainted by pockets share, the place one fan should purchase a number of albums — a typical incidence among the many Ok-pop fanbase.
The analysts additionally mentioned album gross sales spiked throughout the pandemic because of the lack of offline interactions, which distorted the metric in relation to followers.
Japan to energy short-term progress
When evaluating the trade by in-person live performance attendance, Goldman mentioned “growth has not stopped scaling at a rapid pace,” and “in the near term, we see audience growth in Japan as the key growth driver.”
The analysts see a considerable fanbase progress alternative for Ok-pop firms within the near-term in Japan, “which we believe is being overlooked by the market.”
They word Japan has been one of many largest abroad fanbases for Ok-pop, with Hybe, SM and JYP taking a mixed 7% of the stay music market in Japan. Goldman identified that Japan’s prime expertise company Johnny & Associates has been mired in a serious scandal, resulting in the trade turning extra favorable to Ok-pop artists.
In 2023, Kouhaku Uta Gassen, the biggest music present in Japan, invited 5 Ok-pop artists and two localized teams produced by Ok-pop firms. It was the primary time the present has featured male Ok-pop artists since 2011 and the biggest variety of Ok-pop teams ever featured in its line up.
Goldman estimated Japan live performance audiences will develop at a 24% compounded annual progress fee from 2023 to 2026, with the mixed share for Hybe, JYP and SM doubling from 7% to 14%.
Catalysts for progress in Japan embody SM’s latest Japanese boy group NCT Wish in addition to JYP’s upcoming boy group NEXZ.
The world fanbase
Goldman can also be bullish on Ok-pop’s world fanbase progress, particularly in markets just like the U.S.
The report pointed to the success of Hybe-managed lady group NewJeans on U.S. charts. In a March 27 report, analysts famous NewJeans’ most up-to-date album hit No. 1 on the U.S. Billboard 200. The group’s lead single, “Super Shy,” charted at No. 2 on the Billboard Global 200.
The group additionally was the primary South Korean lady group to carry out at Lollapalooza. The Chicago Sun Times reported the group might have managed to attract the largest viewers ever for the competition’s 5 p.m. slot.
Le Sserafim, managed by Hybe subsidiary Source Music, additionally made their debut on the Coachella music competition on April 13, with one other present scheduled for April 20.
Hybe additionally lately introduced that it’ll develop its partnership with Universal Music Group, together with unique distribution rights for Hybe’s artists and labels. UMG’s roster consists of Taylor Swift, Ariana Grande and Justin Bieber.
Goldman mentioned the announcement is a visual signal that Ok-pop is turning into mainstream globally, resulting in a aggressive place that enables stronger bargaining energy in enterprise relationships.
The analysts concluded there’s “a long runway of growth ahead” for the sector, including that “further downside for wallet share, which has normalized close to pre-Covid levels, seems limited, in our view.”
https://www.cnbc.com/2024/04/17/goldman-sachs-sees-turnaround-for-kpop-stocks.html
