SM Entertainment, HYBE, YG Entertainment, and JYP Entertainment stocks plunged approximately 40% this year, with SM falling 49.33%, YG down 44.74%, HYBE declining 38.94%, and JYP dropping 38.81%, according to Korea Exchange data. The declines occurred despite revenue forecast increases across all four companies and strong operational performance from major artist comebacks including BigBang and BTS. Analysts attribute the stock weakness to investor concentration in AI-related semiconductor stocks, concerns over artist succession gaps following high-seniority performers, and diminished expectations for China's hallyu restriction lift, even as concert attendance and album sales reached robust levels during the period.
Entertainment Stocks Record Sharp Declines This Year
Korea Exchange data showed SM Entertainment declined 49.33% from the start of this year, marking the largest drop among the four major entertainment companies. YG Entertainment fell 44.74%, HYBE dropped 38.94%, and JYP Entertainment decreased 38.81% during the same period. The performance contrasted sharply with the KOSPI index, which rose 67.75%, while the KOSDAQ declined 17.03%.
Brokerage firms revised target prices downward this month despite maintaining higher earnings forecasts. According to FnGuide, nine brokerages lowered target prices for SM and HYBE, eight for YG, and eleven for JYP. Revenue forecasts for this year remained above prior-year levels: JYP up 6.46%, SM up 7.30%, YG up 12.62%, and HYBE up 68.38% compared to the previous year.
Companies Report Strong Concert and Album Sales
HYBE's second-quarter concert attendance totaled 2.38 million, with BTS contributing 1.43 million attendees and serving as the core revenue driver, according to company data. SM Entertainment's Asian tours by NCT Wish, aespa, and Irene, combined with performances by TVXQ, EXO, and Super Junior, were projected to exceed 700,000 total attendees.
First-quarter album sales across the four entertainment companies reached 13.78 million copies, representing 113% growth compared to the same period in the previous year. Park Jun-hyung, SK Securities researcher, stated the entertainment industry maintained solid fundamentals during the first half of this year based on these metrics.
AI Sector Concentration Pressures Entertainment Valuations
Park Jun-hyung noted, "In the first half of this year, the entertainment industry was marginalized in the market due to geopolitical risks and supply concentration toward specific sectors, leading to continued stock price adjustments." Ji In-hae, Shinhan Investment & Securities researcher, stated, "The entertainment sector's price-to-earnings ratio has fallen from the past range of 20-35 times to the current 12-22 times due to AI investment concentration and excessive concerns following the sell-off after BTS comeback momentum."
High-Seniority Artist Costs Limit Profit Margins
Increasing concert activity drove higher revenue but also raised content production costs, with audience concentration around high-seniority artists limiting margin expansion. Lee Hwan-wook, Yuanta Securities researcher, analyzed SM Entertainment: "Due to the high proportion of high-seniority intellectual property, operating leverage in the performance sector is expected to be somewhat limited." High-seniority artists retain a relatively larger share of concert revenue compared to junior artists, where companies capture a greater portion.
Fading Hallyu Ban Expectations Weigh on Sentiment
The disappearance of expectations for China's hallyu restriction lift, which had previously supported entertainment stock prices, contributed to the decline. Lim Su-jin, Kiwoom Securities researcher, stated, "Despite continued strong growth in albums, concerts, and merchandise in the first half, weak stock performance across the entertainment sector persists due to the disappearance of expectations for hallyu ban removal."
Analysts Tie Future Performance to Junior Artist Growth
Industry analysts indicated that stock price recovery depends on confirming growth of junior intellectual property amid current undervaluation. YG requires clear successors to BigBang and BLACKPINK, HYBE needs artists following BTS, and JYP must develop performers after TWICE and Stray Kids. HYBE's Katseye, SM's NCT Wish and Hearts to Hearts, JYP's NMIXX and Kickflip, and YG's Babymonster and TREASURE represent key junior IP receiving expectations.
Lim Do-young, Daol Investment & Securities researcher, stated, "The direction of IP scale expansion remains valid, with tours of 800,000-1 million scale by major junior IPs concentrated in the second quarter of 2027 and 2028. If growth continues to exceed expectations, multiples could be reflected in advance."
FAQ
Q: What caused Korean entertainment stocks to decline this year despite strong artist comebacks?
A: According to Korea Exchange data and analyst reports, the stocks fell due to investor concentration in AI-related semiconductor sectors, concerns over succession gaps after high-seniority artists, and diminished expectations for China's hallyu restriction lift, even as concert attendance and album sales showed robust growth.
Q: How did HYBE's concert performance contribute to revenue in the second quarter?
A: HYBE's second-quarter concert attendance totaled 2.38 million, with BTS contributing 1.43 million attendees and serving as the core revenue driver, according to company data cited in the source article.
