Korean entertainment stocks declined 40-50% over the past 4 months, with HYBE falling 50.43%, YG Entertainment down 43.72%, SM down 38.07%, and JYP Entertainment down 26.36%, according to Korea Exchange data. Securities firms attribute the decline to investment capital shifting toward AI-related stocks and concerns over BTS's activity gap. Despite the sharp price drop, analysts describe current valuations as a historic undervaluation, with HYBE trading at 22x 2027 estimated PER and SM/JYP/YG at 12-15x 2026 estimated PER, and recommend the sector for strong portfolio weighting as Q2 earnings are expected to show improvement.
Korean Entertainment Stocks Fall 40-50% in Four Months
Over the past 4 months, HYBE's stock price dropped 50.43%, effectively halving in value. YG Entertainment declined 43.72%, SM fell 38.07%, and JYP Entertainment decreased 26.36%, according to Korea Exchange data.
Securities firms identified three primary factors behind the decline: concentrated investment flows into AI-related stocks, concerns over BTS's activity gap, and certain one-time costs. However, analysts noted that current stock prices are excessively low relative to actual earnings performance.
Securities Firms Identify Historic Undervaluation in Entertainment Sector
Hana Securities analyzed that current valuations have entered a historically undervalued range for the entertainment sector. HYBE trades at 22x estimated 2027 PER, while SM, JYP, and YG trade at only 12-15x estimated 2026 PER, indicating corporate value has fallen significantly below earnings levels.
The securities firm noted that price corrections occurred far more steeply than anticipated time-based adjustments, and presented a 'strong overweight' strategy for the sector as a whole.
HYBE Q2 Operating Profit Forecast at 144.5B-161.2B Won
Hana Securities forecast HYBE's Q2 operating profit at 144.5 billion won, projecting record-high earnings. Meritz Securities projected revenue of 1.3 trillion won and operating profit of 161.2 billion won, exceeding market expectations. Samsung Securities forecast revenue of 1.2895 trillion won and operating profit of 152 billion won.
Concert operations anchor the earnings improvement. Approximately 1.7 million concert attendees, including the BTS world tour, are reflected in earnings. Activities by Tomorrow X Together (TXT), LE SSERAFIM, BOYNEXTDOOR, and ILLIT also contribute to results.
Market observers note that post-BTS growth pillars are rapidly establishing themselves. Rookie group Cortis's second album accumulated sales already exceed 2.9 million copies, with additional version sales expected to push totals past 3 million copies. KATSEYE, targeting the US market, entered Billboard's Hot 100 and is expected to sell approximately 1 million copies with the upcoming comeback.
Lee Ki-hoon, researcher at Hana Securities, stated in a report that "Cortis and KATSEYE are changing the world."
Samsung Securities lowered its target price from 380,000 won to 330,000 won after conservatively adjusting some label profitability forecasts, but maintained a 'Buy' rating. The firm projected that from Q2 onward, core business competitiveness will be reconfirmed as earnings improvements across concert, album, and platform divisions accelerate based on artist IP competitiveness.
SM, JYP, YG Announce H2 Comeback and Tour Schedules
Major entertainment companies have scheduled large-scale events for H2.
SM's Q2 earnings are expected to meet market expectations due to activities and concert effects from NCT WISH, aespa, RIIZE, and Hearts2Hearts. Hana Securities forecast Q2 revenue of 330.5 billion won and operating profit of 53.8 billion won. The debut of new boy group 'SMTR' within the year and NCT127's full-group activities in 2027 were presented as additional growth drivers.
JYP's Q2 operating profit is expected at 37.9 billion won, slightly below market expectations, but earnings recovery is projected as Stray Kids' comeback and large-scale world tour begin in Q3. Currently announced Asia concerts alone total approximately 590,000 attendees. If schedules expand to North America and Europe, the tour could again mobilize over 2 million attendees.
YG's Q2 operating profit is also expected at 7.7 billion won, below market expectations, but BIGBANG's 20th anniversary dome and stadium tour starting next month is identified as the biggest variable. Hana Securities projected that the 31 shows scheduled through next February are likely to add more dates, and with album releases and MD sales included, annual operating profit could expand to approximately 80 billion won.
Securities firms assess that if investment capital concentrated in AI-related stocks gradually shifts toward earnings-focused investments, other entertainment companies are likely to receive revaluations alongside HYBE. The recent sharp stock decline reflects more investor sentiment contraction than earnings deterioration, so as H2 earnings momentum is confirmed, the sector-wide rebound scale could expand.
FAQ
What caused Korean entertainment stocks to fall 40-50% over the past 4 months?
Securities firms identified three primary factors: concentrated investment flows into AI-related stocks, concerns over BTS's activity gap, and certain one-time costs. HYBE fell 50.43%, YG Entertainment declined 43.72%, SM dropped 38.07%, and JYP Entertainment decreased 26.36% over the past 4 months, according to Korea Exchange data.
Why do securities firms describe current entertainment stock valuations as historically undervalued?
Hana Securities analyzed that HYBE trades at 22x estimated 2027 PER, while SM, JYP, and YG trade at only 12-15x estimated 2026 PER. Analysts noted that current stock prices are excessively low relative to actual earnings performance, with price corrections occurring far more steeply than anticipated time-based adjustments, prompting a 'strong overweight' strategy recommendation for the sector.
What are HYBE's Q2 earnings forecasts from securities firms?
Hana Securities forecast HYBE's Q2 operating profit at 144.5 billion won, projecting record-high earnings. Meritz Securities projected revenue of 1.3 trillion won and operating profit of 161.2 billion won. Samsung Securities forecast revenue of 1.2895 trillion won and operating profit of 152 billion won. Concert operations, including the BTS world tour with approximately 1.7 million attendees, anchor the earnings improvement.
