SK Securities maintained its "buy" rating on SM Entertainment (KOSPI: 041510) on the 23rd, while lowering its target price from 134,000 won to 120,000 won. Based on the current share price of 67,000 won (as of 22nd July), the implied upside stands at 79.1%.
Analyst Park Jun-hyung attributed the target price reduction to two cost items now incorporated into annual estimates: investment spending to expand girl group aespa's footprint in the North American market, and debut costs for SMTR25, a new act scheduled to launch in the fourth quarter.
For the second quarter of 2026, SK Securities forecasts revenue of 332.7 billion won, down 3.5% year on year, and operating profit of 53.3 billion won, up 11.9%, implying an operating margin of 16.0%. Both figures are expected to modestly exceed market consensus, with growth in merchandise (MD) sales identified as the primary driver.
Album shipments are projected to decline approximately 2% year on year to 5.73 million copies. Concert revenues, however, are expected to grow, supported by large-scale tours and rising audience numbers across SM's major acts, including aespa, EXO, TVXQ, Super Junior, and SHINee.
For the full year 2026, the brokerage estimates revenue of 1.2794 trillion won and operating profit of 186.8 billion won, representing an operating margin of 14.6%.
Park cautioned that earnings momentum in the second half of the year would be more subdued than in the first half. Nevertheless, he argued that investors should look beyond any near-term slowdown. "SMTR25 is already building a core fanbase ahead of its debut through variety programmes, fan meetings, and other content," he noted, adding that the clearer picture of returns on that investment should emerge in 2027.
SM Entertainment has a market capitalisation of 1.5340 trillion won. Its principal shareholders are Kakao and affiliated parties (41.67%) and Tencent Music Entertainment (9.66%).