Analysts slash SM Entertainment price targets as share price falls more than 50%

"I bought SM Entertainment shares and lost 60%. I finally cut my losses." — a retail investor

SM Entertainment, the agency behind leading girl group aespa, has seen its share price collapse, leaving investors in distress. The stock, which once traded above 170,000 won ($123), has been fluctuating in the 60,000 to 70,000 won range.

With the share price having fallen by more than half, retail investors have been venting their frustration at the company. "I trusted aespa too much and completely lost out," wrote one investor. Others demanded the company "do something about the share price" or said they had "cut losses after the stock was halved."

The collapse in sentiment toward entertainment stocks has prompted a wave of target price cuts from brokerages.

According to Korea Exchange, SM Entertainment shares closed at 75,800 won on Friday. The stock once reached 170,000 won, meaning it has shed more than half its peak value.

Most SM Entertainment investors are sitting on heavy losses. Kakao, which paid 150,000 won per share — a total of 1.2 trillion won — to acquire SM Entertainment three years ago, has also been put in a difficult position by the share price collapse.

At the time of the acquisition, SM Entertainment's management confidently projected 2025 sales of 1.8 trillion won and operating profit of 500 billion won, and boldly declared that "a share price target in the 300,000 won range is by no means an impossible figure." Those boasts have since come back to haunt the company.

LS Securities lowered its target price for SM Entertainment from 140,000 won to 120,000 won, citing a downward revision to its earnings outlook. Samsung Securities also cut its target from 114,000 won to 105,000 won after adjusting its profit estimates for next year.

iM Securities said it was lowering its target price for SM Entertainment from 140,000 won to 120,000 won, citing a sector-wide decline in valuations. The brokerage said it had cut its operating profit forecast for this year to reflect a second-half earnings gap caused by rescheduled tours for major junior-generation groups and a shift in focus toward promoting aespa in Western markets.

iM Securities added that a valuation re-rating could become possible once meaningful results materialize in key markets such as China and the United States, but that the target cut reflected current conditions across the entertainment sector.

Analysts said whether aespa's world tour succeeds in expanding its fandom in Western markets in the second half of the year will be the key variable for the company's medium- to long-term earnings and valuation.

SM Entertainment posted consolidated second-quarter sales of 349.6 billion won and operating profit of 52.9 billion won, up 15.4 percent and 11 percent, respectively, from the same period a year earlier. While the results held up reasonably well, growing doubts about the company's growth trajectory have kept the share price pinned near its lows.