On Thursday, Citi issued a double downgrade on Netmarble (251270:KS), moving its stock rating from Buy to Sell. The firm also adjusted the price target for the South Korean gaming company to KRW 48.00, a decrease from the previous KRW 67.00.
The downgrade comes despite Netmarble's recent operational performance, where it reported a positive operating profit (OP) of W17.7 billion for the fourth quarter of 2023. This figure surpassed the consensus estimate of W9.4 billion. The improvement in earnings was attributed to two main factors: the full-quarter revenue impact of "Seven Knights Idle Adventure," which was released on September 6, 2023, and effective cost control measures in labor and marketing.
Netmarble's share price has experienced a significant rebound, increasing by 34.2% over the past three months. This rally was partly due to investor optimism surrounding the company's financial turnaround and its deleveraging actions, including the sale of its stake in Hybe for W524 billion in November 2023.
Moving forward, the focus for Netmarble is expected to shift towards further earnings enhancements, the success rates of upcoming games in its pipeline, and the company's valuation. Citi suggests that these factors could place pressure on Netmarble's current share price levels.
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