On Wednesday, NCsoft Corp (KS:036570:KS) received an upgrade from Neutral to Buy by a Citi analyst, accompanied by a significant increase in the price target to KRW265,000 from the previous KRW180,000. The upgrade came despite NCsoft's operating profit for the third quarter of 2024 dipping into the negative, a scenario that had been anticipated by the market following the underwhelming launch of Hoyeon.
The analyst pointed to several factors that contributed to the positive outlook. Firstly, the market had already braced for the third-quarter results post Hoyeon's launch. Secondly, management has indicated a substantial reduction in workforce by the end of 2024, which is expected to immediately lessen the company's fixed cost burden starting from the first quarter of 2025.
Additionally, the analyst highlighted the promising nature of NCsoft's upcoming game pipeline. This includes titles such as "Journey of Monarch," expected in the fourth quarter of 2024, "Tactan" in the first half of 2025, and "Aion 2" in the second half of 2025. These games are believed to have better potential for success compared to Hoyeon, which contributed nearly nothing to the third-quarter revenue of 2024.
Moreover, "Throne & Liberty" (TL), another NCsoft title, has been consistently ranking within the top three or four on Steam's best-selling game chart, surpassing Krafton's "PUBG," which is ranked between fifth and ninth. The sustained performance of "Throne & Liberty" on a major platform like Steam further underpins the analyst's optimistic perspective on the company's stock.
In summary, the analyst's decision to upgrade NCsoft to a Buy rating and raise the price target reflects a belief in the company's strategic cost-cutting measures and the promising lineup of new games set to launch in the near future.
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