K-pop stocks bank on fifth-gen acts as 2027 becomes the year to watch

Target prices for South Korea's four major entertainment companies — Hybe, SM Entertainment, JYP Entertainment and YG Entertainment — have been cut repeatedly in the second half of this year. Activity gaps among established popular acts, compounded by the cost of developing new groups, have made it difficult to raise near-term share price expectations. Market attention is shifting toward 2027, when fifth-generation intellectual properties such as Cortis, Katseye, NCT Wish, Kickflip and Babymonster are expected to begin translating into earnings, even as flagship acts including BTS continue to perform.

According to financial data provider FnGuide, target prices for all four companies have been lowered in succession during the second half of this year. NH Investment & Securities cut targets for most of the four: Hybe from 310,000 won ($231) to 250,000 won, JYP from 69,000 won to 58,000 won, and YG from 64,000 won to 57,000 won. SM's target was kept at 109,000 won. The price-to-earnings ratios applied to the target prices were also trimmed — Hybe from 30 times to 27 times, JYP from 21 times to 17 times, and YG from 26 times to 21 times — reflecting misaligned activity schedules among established groups and the added burden of investing in new acts.

The market's focus has settled on 2027, when all four companies are forecast to post rising operating profits. Projected 2027 operating profit stands at 616.2 billion won (+95.8%) for Hybe, 215.4 billion won (+13.9%) for SM, 166.6 billion won (+8.3%) for JYP and 86.6 billion won (+24.1%) for YG. The downward revisions to target prices and valuation multiples — Hybe from 30 times to 27 times, JYP from 21 times to 17 times, YG from 26 times to 21 times — reflect both the uneven activity schedules of established acts and the cost of building new ones.

Hybe has the broadest portfolio of new intellectual properties among the four. BTS activity continues, while Cortis, Katseye, BoyNextDoor and TWS have each carved out their own footing. Cortis in particular has been rapidly expanding its fandom and growing album sales, while Katseye has also been generating results on overseas streaming charts. "The growth of new groups that had been overshadowed by BTS is now starting to show in earnest," said Lee Hwa-jeong, an analyst at NH Investment & Securities, who named Hybe as the top pick in the entertainment sector.

At SM, established groups continue to underpin earnings while NCT Wish and Riize sustain their growth momentum. NCT Wish has seen a clear uptick in new album sales and is expected to expand its performance scale. Riize, meanwhile, has kept generating revenue despite a lineup change, with its latest album selling more than 1 million copies. A new rookie boy group is also set to debut early next year. "Established popular groups are supporting earnings while new acts like NCT Wish are also seeing their activities improve steadily," Lee said, forecasting that the growth trend would continue into next year.

For JYP, the key question is how well new intellectual properties can fill the gap left by established acts on hiatus. Twice's contract renewal situation has made it harder to predict full-group activity, and there are concerns surrounding Stray Kids members' mandatory military service. Lee was measured on both fronts, however. "For Twice, activity cycles are simply getting longer — it is not that they are stopping," she said. "Concerns about Stray Kids' military service are also premature at this point." Among new acts, she highlighted the growing results from Kickflip as a positive sign.

YG remains heavily influenced by high-tenure acts like Blackpink and Big Bang, whose activity schedules cause significant swings in quarterly results. Babymonster has been filling that void, with a world tour currently underway and more performances expected next year. An upcoming rookie boy group debut, however, means investment costs could rise before the benefits materialize. "Even if Babymonster's activities increase next year, the cost of developing the new boy group will be greater," Lee said, adding that the investment burden was likely to persist for now.