LS Securities has downgraded its target price for SM Entertainment from 120,000 won to 110,000 won, citing limited profit contributions from emerging groups like Rise and Hearts to the company's second-half earnings.
In a report released on September 9, analyst Park Seong-ho stated, "We expect a slowdown in revenue and profit growth due to a decrease in major artists' comebacks and a high base effect compared to last year."
He added, "Aespa is set to conduct an arena tour focused on Western markets, which is likely to increase performance costs. Additionally, emerging groups like Rise and Hearts will primarily focus on overseas promotions in the second half, limiting their short-term profit contributions."
Despite the lowered target price, LS Securities maintained a 'buy' rating. Earlier this year, SM Entertainment unveiled its 'SM NEXT 3.0' plan, outlining its growth strategy for this year and the long term. The company is currently seeing some results centered around lower-tier intellectual properties and global business as of the second half of 2026.
The global business is also gradually expanding. Aespa is expected to conduct a larger tour in North America and Europe compared to last year, with 26 performances scheduled across 25 cities by February 2027.
The company is also actively incorporating artificial intelligence (AI). While the results have not been as significant as anticipated, it became the first major domestic agency to debut an AI artist named Naivis.
Park emphasized, "After a brief pause in second-half performance, we expect a return to a growth cycle next year, driven by the expansion of activities from major groups. The increased global revenue contributions from lower-tier groups and the active engagement of higher-tier and legacy intellectual properties are expected to be the two main pillars of growth."
In a report released on September 9, analyst Park Seong-ho stated, "We expect a slowdown in revenue and profit growth due to a decrease in major artists' comebacks and a high base effect compared to last year."
He added, "Aespa is set to conduct an arena tour focused on Western markets, which is likely to increase performance costs. Additionally, emerging groups like Rise and Hearts will primarily focus on overseas promotions in the second half, limiting their short-term profit contributions."
Despite the lowered target price, LS Securities maintained a 'buy' rating. Earlier this year, SM Entertainment unveiled its 'SM NEXT 3.0' plan, outlining its growth strategy for this year and the long term. The company is currently seeing some results centered around lower-tier intellectual properties and global business as of the second half of 2026.
The global business is also gradually expanding. Aespa is expected to conduct a larger tour in North America and Europe compared to last year, with 26 performances scheduled across 25 cities by February 2027.
The company is also actively incorporating artificial intelligence (AI). While the results have not been as significant as anticipated, it became the first major domestic agency to debut an AI artist named Naivis.
Park emphasized, "After a brief pause in second-half performance, we expect a return to a growth cycle next year, driven by the expansion of activities from major groups. The increased global revenue contributions from lower-tier groups and the active engagement of higher-tier and legacy intellectual properties are expected to be the two main pillars of growth."
* This article has been translated by AI.
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