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On Thursday, Bernstein SocGen analysts began coverage of NEXON Co., Ltd (3659:JP) (OTC:NEXOF), assigning a Market Perform rating and setting a price target of JPY2,200.00. The new rating reflects the company’s current position as a business undergoing changes, with its profitability heavily dependent on the Chinese market through its partnership with Tencent (HK:0700).
Nexon, primarily a Korean video gaming company listed in Tokyo, has been successful in China, where it makes most of its profits. However, analysts noted that Nexon’s key revenue generator, Dungeon And Fighter (DNF), is largely reliant on the Chinese market. This focus on a single market poses risks for the company, especially as its other intellectual properties (IPs) are considered niche on a global scale and may struggle for visibility in a competitive industry.
The company also publishes EA’s EA Sports FC in Korea, which has encountered issues recently, as indicated by EA’s profit warning and subsequent share price decline earlier this year. These challenges highlight some of the difficulties Nexon faces in diversifying its portfolio and maintaining profitability.
Further changes within Nexon’s organizational structure were highlighted, with the March 2024 replacement of former CEO Owen Mahoney by Lee Junghun. Mahoney was instrumental in Nexon’s partnership with EA on FIFA and then EA Sports FC, as well as the acquisition of Embark. The appointment of a new CEO suggests a strategic pivot towards Korea-based assets and studios, although it remains to be seen how these changes will translate into positive developments for the company.
A senior industry executive recently shared that while Nexon has moved on from the benefits brought by the former CEO, it is not yet apparent whether the new management has managed to establish new strengths for the company. As Nexon continues to adapt to the evolving gaming landscape, the market will closely watch its progress and the effectiveness of its strategic decisions.
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