Duoao Investment Securities lowers the target stock price of Shift Up to 40k Korean Won

Daiwa Securities predicted on the 15th that Shift Up’s performance in the first quarter of this year will fall short of market expectations, leading to a downward adjustment of the target stock price from 48k won to 40k won. The assessment believes that the sales momentum of core titles has weakened, coupled with a release gap for new games and increased expenses due to acquisitions, which worsens the profit outlook.

Daiwa Securities analyst Kim Hye-young diagnosed that Shift Up’s flagship mobile game “Victory Goddess: Niki” experienced a slowdown in sales momentum in the Japanese market compared to the previous quarter. The average sales ranking in Japan for the first quarter was 17th, down one position from 16th in the fourth quarter of last year. Although there was a “Velvet” event in January and a collaboration with “LicoLiss” in February, overall sales are expected to decline compared to the previous quarter. In the gaming industry, updates and collaborations can serve as short-term catalysts for a rebound, but often their sales expansion effects are not as strong as launching new titles.

The securities firm expects Shift Up’s operating profit in the first quarter to be only 22.8 billion won. This is below the market average expectation of 28.1 billion won and a 36.4% decrease from the previous estimate of 35.8 billion won. The downward revision of performance expectations is primarily due to the lack of new titles this year. Additionally, costs such as personnel and operational expenses are expected to increase due to the acquisition of Japanese developer Unbound. While long-term corporate acquisitions may serve as a means to expand development capacity, in the short term, they often result in increased expenses that erode profits.

Daiwa Securities also lowered its forecasts for the second half of the year. The operating profit estimate for the second quarter was revised downward by 18% from the original 35.1 billion won to 28.7 billion won, with projections for the third and fourth quarters also reduced by 30% and 22%, respectively. This not only indicates issues with quarterly performance but also suggests that overall profit growth this year may be slower than expected. Game stocks are typically influenced by new release schedules and the ability to sustain sales of existing popular titles, and this year, the weaker momentum for new titles puts pressure on Shift Up.

However, the investment advice remains a “Buy.” Daiwa Securities notes that “Star Blade” is expected to generate additional sales through platform expansion in the fourth quarter, and the company is planning according to a schedule of releasing major titles annually. This means that despite the downward revision of short-term performance expectations, the expansion of intellectual property (IP, such as games and characters) and the full launch of new titles will enable the company to regain growth momentum. Such trends imply that future evaluations may depend less on short-term performance and more on mid- to long-term release plans and whether the lifecycle of existing popular titles can be extended.