According to the Korea Exchange, as of 2:05 PM on June 11, W Games shares were trading at 74,700 won, up 4,500 won (6.41%) from the previous trading day. During the session, the stock peaked at 76,500 won, marking a new 52-week high. This represents a 62.7% increase compared to the 52-week low of 47,000 won recorded on March 4.
Analysts suggest that the recent surge in stock price cannot be solely attributed to improved earnings. The market is evaluating the company's value as it simultaneously innovates game development through AI, diversifies its business portfolio, and moves towards fully acquiring its Nasdaq-listed subsidiary.
A significant aspect of this transformation is the company's capability to utilize AI. W Games has established an 'AI Lab' at its subsidiary Paxie Games, automating the entire game development process. This system allows for the completion of all stages—from game planning to graphic asset creation, balancing tests, and global launches—within three weeks for a single developer.
This capability is seen as a crucial competitive advantage in the hyper-casual gaming market. Previously, developing a single game could take months, but with AI, multiple games can be launched quickly, allowing the company to selectively scale based on market responses.
The AI-driven strategy is already yielding results. Following the success of 'Merge Studio,' Paxie Games has seen rapid revenue growth from AI-utilized games such as 'Wiggle Escape' and 'Tile Star.' The share of casual game revenue increased from 9.6% in the fourth quarter of last year to 12% in the first quarter of this year.
The company plans to secure a lineup of over 50 AI games by the end of the year, aiming to boost profitability in the casual gaming sector to double digits.
W Games' core business in social casino games continues to serve as a stable cash generator. In the first quarter of this year, consolidated revenue reached 205 billion won, with an operating profit of 68.5 billion won, surpassing 200 billion won in quarterly revenue for the first time since its founding. The company maintained an operating profit margin of 33.4% despite aggressive marketing expenditures, which has been positively received by the market.
The high profitability is attributed to a Direct-to-Consumer (DTC) strategy. The proportion of in-house payments increased to 38.7% in the first quarter, significantly reducing the burden of app market fees. This cost reduction has helped offset the increase in marketing expenses for new games.
Analysts believe that the expansion of DTC is not yet complete. Having already reached the initial year-end target of 40% in the first quarter, there is potential for it to exceed 50% if current trends continue. Additionally, the impact of reduced app market fees from Google and Apple in the North American market could further accelerate profitability improvements.
The restructuring of the business is also stimulating investor sentiment. In April, W Games announced plans to acquire the remaining 32.9% stake in its Nasdaq-listed subsidiary, DoubleDown Interactive (DDI), at $11.25 per share, aiming for full ownership.
Market observers view this decision as a way to mitigate the risks of dual listing and as a foundation for future mergers and acquisitions (M&A). If the subsidiary is delisted from Nasdaq after the acquisition, improvements in consolidated net income are also anticipated.
Brokerages have been raising their target prices for W Games since last month. Shinhan Investment Corp. and IBK Investment & Securities set target prices of 100,000 won on May 22 and June 1, respectively. Kang Seok-oh, a researcher at Shinhan Investment Corp., stated, "AI, M&A, and governance improvements will simultaneously elevate earnings per share (EPS) and price-to-earnings ratio (PER)," designating W Games as a top pick.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.