Alphabiz - Brokerages Cut SM Entertainment Target Prices Despite Earnings Growth Outlook

Photo courtesy of Yonhap News

[Alpha Biz= Ellie Kim] Brokerages in South Korea have been lowering target prices for SM Entertainment, even as the company is expected to deliver solid earnings growth.

According to industry data on February 18, at least six securities firms—including Shinhan Securities, Hanwha Investment & Securities, Eugene Investment & Securities, IBK Investment & Securities, iM Securities, and Meritz Securities—revised down their target prices for SM over the past week.

Meritz Securities cut its target price from KRW 180,000 to KRW 140,000, while iM Securities also lowered its estimate to KRW 140,000. Other firms set targets ranging from KRW 120,000 to KRW 130,000.

The revisions come despite expectations that SM’s first-quarter results will slightly exceed market consensus. The company is projected to post revenue of KRW 263 billion and operating profit of KRW 39 billion, representing year-on-year growth of 13.6% and 19.7%, respectively.

Growth is expected to continue, supported by expanding tours and fanbases for younger artists such as aespa, RIIZE, and NCT Wish, with further momentum anticipated in the second quarter as comeback schedules and tours ramp up.

Analysts, however, cited several factors behind the downward revisions. These include uncertainties related to artist contract changes, shifts in revenue contribution among groups, and rising upfront promotion costs tied to global expansion.

A broader decline in valuation multiples across the entertainment sector has also weighed on target prices. Analysts pointed to concerns over sector peak-out, weaker capital flows into mid-cap stocks, and macro factors affecting investor sentiment.

Despite the lowered targets, brokerages have maintained “Buy” ratings, noting that the stock is trading at historically low valuation levels. At around 14 times forward earnings, SM’s current valuation is below its historical floor of 15 times, suggesting limited downside and potential for recovery.

Analysts added that improved fundamentals, expanding presence in China, and early-stage growth opportunities in North America support a positive long-term outlook.

Alphabiz Ellie Kim 인턴기자(press@alphabiz.co.kr)