Game stocks plunge in S. Korea, US 

Game shares in South Korea and the United States have plunged, hit by worse-than-expected earnings. 

Online game developers in Korea have also been affected by investors’ lack of confidence in the companies’ ability to reap profit in new business sectors including non-fungible tokens (NFTs) and the metaverse.

Analysts expect the dampened investor sentiment to continue for some time and the popularity of the products’ storylines to decide the direction of the Korean gaming industry. 

Shares of Roblox Corp. surged last year on the back of global interest in metaverse platforms. Its performance did not quite match the hype. 

The California-based game developer announced that its Q4 2021 earnings per share (EPS) recorded minus $0.25, lower than the Wall Street estimate of minus $0.12.

As schools reopen and workers return to their offices in the States despite the continued COVID-19 scare, Americans spent fewer hours playing online games late last year. 

Roblox shares plunged some 27% to finish Tuesday’s trade at $53.87. 
 
Electronic Arts, Inc. also posted a lower-than-expected Q4 EPS of $3.20. 

The figure of Activision Blizzard, Inc. was below market expectations as well, at $1.25.

Despite the negative news, Electronic Arts shares rose 5% only two days after the disappointing earnings report. The rebound comes on the back of the strong performance of its soccer video game FIFA and some other sports gaming products.

Activision Blizzard stocks rose 19% last month on the news of its acquisition by Microsoft. Microsoft will acquire the gaming company for $95.00 per share, in an all-cash transaction valued at $68.7 billion.

DIFFERENT FACTORS

Unlike in the US where positive news such as mergers and acquisitions are keeping share prices afloat, Korean gaming shares have been hit hard by the worse-than-expected earnings. 

NCSoft Corp. posted Q4 revenue of 757 billion won and operating profit of 110 billion won. The financial market’s consensus estimate for its operating profit was 221 billion won. 

While US game stocks were hit by the end of stay-at-home measures related to COVID-19, Korean game shares were negatively affected by high expectations.

Lineage M and Lineage 2M by NCSoft both did not perform as well as market expectations.

Investors had hoped the adoption of NFTs in online games could serve as the driving force for NCSoft. But the company has yet to announce detailed plans for the adoption timeline. 

The gaming giant’s shares slid 4% to finish Wednesday’s trade at 492,500 won. The figure is the lowest since December 2019. 

Shares of other Korean gaming companies like Krafton Inc. are also low, hit by rising labor costs. During the COVID-19 pandemic, the companies significantly increased salaries and financial incentives for developers to recruit the best talent. 
 
Analysts forecast it will take some time for both Korean and US game publishers to reap the benefits of incorporating NFTs or the metaverse in their products. Instead, they expect the popularity of existing and new games to determine the share prices in the near term. 

“As workers and students in the US return to offices and schools, sales of major online games have slowed,” Mirae Asset Securities analyst Jung Yong-je said.

Jung recommends paying attention to companies that expand their already popular game lineups, such as Electronic Arts with their FIFA series. 

Write to Sul-Gi Lee at surugi@hankyung.com
Jee Abbey Lee edited this article.