2H23 Outlook
The author is an analyst for NH Investment & Securities. He can be reached at jaemin.ahn@nhqv.com -- Ed.
During the era of ample liquidity just a few years ago, the Internet sector enjoyed a strong boom as a leading platform industry. However, with interest rates rising and the economy slowing, Internet shares have been experiencing sharp valuation de-ratings since 2021. Weighed upon by tanking earnings, Internet sector shares had been in a prolonged correction phase. But, we foresee an end to the two-year-long slide in 2H23, noting that earnings recoveries are underway in the ad and commerce markets. The burgeoning AI theme should serve as a catalyst for future earnings growth.
We believe that the main game changer for the game industry in 2H23 be new game roll-out momentum. With a rising number of MMORPGs now featuring in app stores’ top-10 gross sales ranking lists, the time appears ripe for a domestic game industry rebound. Other noteworthy positives include global market entries for domestic games as well as the resumption of business license issuance by the Chinese government.
We offer NAVER, NCSOFT, and NHN as top picks for 2H23. In addition to stable search ad and commerce business growth, NAVER’s new AI business launch in 2H23 should place it in the spotlight. NCSOFT’s TL looks to become a new blockbuster, and NHN’s annual OP should return to the 2021 level.