Entertainment stocks show relative resilience amid market slump; HYBE shares fluctuate despite record earnings
Profitability gap persists despite expanding concert and merchandise sales as market eyes 2027 growth
As a sharp sell-off centered on semiconductor stocks rattles the broader equities market, South Korean entertainment agencies are drawing renewed attention. Following broad gains across the Big Four entertainment firms a session prior, select shares showed relative resilience. While HYBE posted a record quarterly performance propelled by BTS's global tour, earnings varied sharply across the sector, with SM Entertainment reporting a 26% drop in operating profit. Investors are increasingly focused on whether expanding concert and merchandise revenue will translate into improved profitability next year.
Entertainment stocks have largely been sidelined in the local market this year. Sinking profit forecasts for major agencies and growing skepticism over their growth trajectories drove steep share price declines. Recently, however, expectations surrounding global tours and the momentum of rookie artists have begun to resurface.
HYBE Plunges Despite Record Earnings: What Stoked Market Fears?
HYBE (352820) reported consolidated revenue of 1.52 trillion won ($1.08 billion) for the third quarter, up 109.8% year-on-year. Operating profit swung back into the black at 188.5 billion won, beating the consensus estimate of 166 billion won compiled by Yonhap Infomax by 13.6%. Both top-line revenue and operating profit marked all-time quarterly highs.
The growth was spearheaded by BTS’s European and North American world tours. Concert revenue surged to 726.8 billion won, accounting for 47.6% of total revenue, while merchandise and licensing sales reached 334.6 billion won. Combined, the two segments generated 1.06 trillion won—roughly 3.8 times the 282.8 billion won brought in by album and digital music sales.
During the North American leg of the BTS tour, approximately 2 million merchandise items were sold across 12 cities over 45 days. According to Yuanta Securities, North American tour merchandise sales alone hit 107 billion won, representing about 32% of HYBE’s total merchandise and licensing revenue. Expanding local production also helped mitigate logistics costs and tariff burdens.
However, HYBE shares tumbled 11.48% on November 4, the day following the earnings release. Despite a robust operating profit, consolidated net income stalled at 11.3 billion won, weighed down by non-operating expenses such as foreign currency asset translation losses triggered by a weaker exchange rate. Investor disappointment was further compounded by the absence of specific schedule details for BTS's activities in the second half of next year.
The outlook for the fourth quarter remains cautious. Song Ji-won, an analyst at Heungkuk Securities, projected that revenue growth momentum would slow, noting that average ticket prices and merchandise purchasing power for the South American leg of the BTS tour are lower than in North America, while Asian performances are recognized as net revenue. She also highlighted potential profitability pressures stemming from logistics, customs, and value-added tax expenses.
SM’s Profit Falls 26%; JYP and YG Face Profitability Tests
SM Entertainment (041510) posted third-quarter consolidated revenue of 291.1 billion won and an operating profit of 35.5 billion won, down 9.5% and 26.4% year-on-year, respectively. The company also recorded a net loss of 1.1 billion won, driven by foreign exchange-related losses stemming from a stronger Korean won.
The downturn was largely attributed to a reduction in domestic album-release activities and a higher proportion of smaller-scale overseas concerts. Revenue from albums, digital music, and concerts declined, while the profitability of certain subsidiaries deteriorated.
Conversely, merchandise and licensing revenue rose 23.5% to 62.1 billion won, and artist appearance revenue climbed 21.3% to 29.2 billion won. Even as core album and concert performances lagged, ancillary businesses leveraging fandom power maintained their growth trajectory.
JYP Entertainment (035900), which is scheduled to release its third-quarter earnings on November 11, is also expected to post a slight profit contraction. SK Securities estimates third-quarter revenue and operating profit at 225.8 billion won and 39.6 billion won, down 2.9% each from a year earlier. While Stray Kids' album sales and tour merchandise are expected to underpin earnings, shrinking concert revenues and rising cost pressures from certain album productions are projected to weigh on the bottom line.
Samsung Securities slashed its target price for JYP from 62,000 won to 50,000 won, citing shifts in TWICE’s activities following contract renewals, the potential military enlistment timeline for Stray Kids members, and the growth pace of junior artists.
YG Entertainment (122870) is expected to see its performance supported by concerts and merchandise sales. Yuanta Securities estimates its third-quarter operating profit at 20.5 billion won—down 34.1% year-on-year, but up 86.6% from the previous quarter.
Concert attendance for the quarter is estimated at roughly 800,000. However, analysts note that as the share of concerts by veteran artists increases, the scope for margin expansion relative to revenue growth may be limited.
Major agencies have slated expanded activities for their core artists next year. HYBE plans to drive sales growth through additional BTS performances alongside younger acts such as Katseye, &Team, and Cortis. SM Entertainment aims to broaden its operational scope with new album releases from RIIZE and Hearts2Hearts, alongside aespa’s European tour.
While JYP anticipates an expanded global tour for Stray Kids, the growth of next-generation groups has become critical to cushion against potential shifts in activity among its legacy marquee acts. YG Entertainment is pushing to develop new boy and girl bands alongside ongoing activities from established artists like BLACKPINK.
HYBE similarly grapples with high revenue dependence on BTS. Lim Soo-jin, an analyst at Kiome Securities, positively assessed the disclosure of additional BTS schedules and the expanding earnings contribution from junior artists. However, she lowered her target price for HYBE from 330,000 won to 280,000 won, reflecting a broader market-wide contraction in valuation multiples.
