On the 15th, Doo Investment Securities predicted that Shift Up's first-quarter results this year would fall short of market expectations, and therefore lowered its target price from 48,000 won to 40,000 won. The assessment is that the sales momentum of its core titles has weakened, coupled with a gap in new game releases and increased expenses due to acquisitions, leading to a deterioration in the profit outlook.
According to Kim Hye-young, a researcher at Duoao Investment & Securities, the sales momentum of Shift Up's representative mobile game, *Victory Goddess: Niki*, in the Japanese market has slowed compared to the previous quarter. In the first quarter of this year, its average sales ranking in the Japanese market was 17th, down one place from 16th in the fourth quarter of last year. Despite the "Velvet" campaign in January and a collaboration with *Lycoris* in February, overall sales are expected to decline compared to the previous quarter. In the gaming industry, while updates and collaborations can act as catalysts for short-term rebounds, in many cases, their sales-boosting effect is not as strong as that of new game launches.
The brokerage firm projects Shift Up's operating profit for the first quarter of this year to be only 22.8 billion won. This is lower than the market average expectation of 28.1 billion won and a 36.4% decrease from the previous estimate of 35.8 billion won. The lack of new projects this year is the primary reason for the downward revision of earnings expectations. Furthermore, the acquisition of Japanese developer Unbound is expected to increase operating expenses such as labor costs and operating expenses. While corporate acquisitions may be a long-term means of expanding development capabilities, in the short term they often manifest as increased expenses, thus eroding profits.
Doo Investment & Securities also lowered its forecasts for the second quarter and the second half of the year. It reduced its operating profit estimate for the second quarter by 18% to 28.7 billion won from the original 35.1 billion won, and also lowered its operating profit forecasts for the third and fourth quarters by 30% and 22%, respectively. This not only indicates a problem with the performance of a single quarter, but can also be interpreted as the overall profit growth for the year potentially being slower than expected. Gaming stocks are typically affected by new game release plans and the ability to maintain sales of existing popular titles. This year, ShiftUp is facing pressure from weaker new game releases compared to these two factors.
However, the investment recommendation remains "Buy". Duoao Investment Securities notes that *Starblade* is expected to generate additional sales through platform expansion in the fourth quarter of this year, and the company is planning according to its strategy of releasing major titles annually. This means that despite downward revisions to short-term earnings expectations, the company will regain growth momentum as its intellectual property (IP, i.e., source content such as games and characters) expands and new release cycles fully commence. This trend implies that future valuations may depend less on short-term performance and more on medium- to long-term release plans and the ability to extend the lifespan of existing popular titles.
