BTS
BTS

SEOUL — South Korea's major entertainment companies are enjoying some of the most visible global success in K-pop history, with BTS touring world stages again, Stray Kids filling arenas internationally, and aespa and BABYMONSTER rapidly expanding their overseas fan bases. But in the stock market, the opposite has been true, with shares of the country's four largest entertainment agencies all declining over the past six months, according to a report published by Chosun Ilbo.

HYBE, the agency behind BTS, has fallen 48.9% over the past six months, the steepest decline among the four major companies. JYP Entertainment, home to Stray Kids, has dropped 41.4% over the same period. YG Entertainment, which manages BLACKPINK, declined 23.3%, while SM Entertainment posted the smallest decline of the group at 9.2%.

Analysts point to a shared underlying problem at both HYBE and JYP: heavy dependence on a single, dominant artist or group. For HYBE, that concentration centers on BTS; for JYP, on Stray Kids. HYBE faces an additional profitability challenge, generating substantial revenue that has not translated into comparable net profit.

According to a report from SK Securities, HYBE's gross margin fell from 43% in the first quarter of this year to 32% in the second quarter, a period that fully reflected BTS's world tour. While concert revenue rose sharply during that stretch, artist settlement payments and production costs for the tour rose alongside it, compressing margins. HYBE reported revenue of 2.6499 trillion won last year, but still posted a net loss of 239.8 billion won for the year. Established, long-tenured artists like BTS, now on renewed contracts, typically receive a higher share of revenue through settlement agreements than they did earlier in their careers, meaning the company's profitability and share price increasingly depend on how well its newer artists perform.

SK Securities analyst Park Jun-hyung lowered his price target on HYBE to 290,000 won, citing the company's concentrated reliance on a single intellectual property. "High dependency on single IP (BTS) means securing new IP to diversify is essential," Park said.

Looking at forward price-to-earnings ratios based on projected 2026 earnings and closing prices from September 23, JYP trades at approximately 11.7 times projected earnings, while YG and SM each trade around 15.6 times. HYBE, by contrast, trades at 35.2 times projected earnings, roughly three times JYP's multiple. A lower forward price-to-earnings ratio is generally associated with a stock being undervalued, though analysts caution that a low ratio can also reflect genuine underlying performance concerns rather than a straightforward buying opportunity.

Sangsangin Securities projects JYP's revenue this year at 806.6 billion won, with operating profit of 141.3 billion won, representing declines of 1.9% and 9%, respectively, from the prior year. The firm's analysis indicates JYP's current performance is effectively being carried by Stray Kids alone, with no clear successor yet established. TWICE faces growing uncertainty around full-group activity, while NMIXX has only just begun its first world tour. Sangsangin Securities analyst Lee Na-ra, in a report titled "Stray Kids Becomes the Breadwinner of JYP," wrote that "rookie groups like NEXZ and Kick Flip are not yet generating revenue large enough to fill Stray Kids' gap," adding that "expanding the scale of lower-tenure IP is urgent."

SM Entertainment's relatively smaller decline reflects a more diversified roster, with aespa operating alongside RIIZE, NCT WISH, Hearts2Hearts and other active groups simultaneously, reducing the company's exposure to any single act's performance. SM's concert revenue is projected at 201.0 billion won this year and its merchandise and licensing revenue at 266.4 billion won, both expected to grow next year to 221.7 billion won and 289.3 billion won, respectively. Based on this year's projected earnings per share of 5,297 won, SM's forward price-to-earnings ratio stands at approximately 15.6 times at current prices, falling to 12.7 times based on next year's projected earnings per share of 6,481 won.

An SK Securities analyst covering SM said the company's push into Western markets through aespa's recent activity is gradually resolving what had previously been a valuation discount tied to limited Western exposure, adding that a strategic shift toward reducing the proportion of Asian tour dates in favor of expanded arena-level shows across Latin America, North America and Europe, where ticket prices are set higher than in Asia, is expected to contribute to improved profit margins going forward.

YG Entertainment continues to rely heavily on BLACKPINK as its dominant global act, with company performance historically fluctuating significantly based on the group's activity level. Growth from girl group BABYMONSTER has begun narrowing that dependence in recent periods. YG's current forward price-to-earnings ratio stands at approximately 15.6 times this year's projected earnings and 13.4 times next year's. Daol Investment & Securities analyst Lim Do-young said BABYMONSTER's continued growth in touring and merchandise sales, combined with the group's planned Western tour and additional scheduled activity from BIGBANG, leaves room for further upward revisions to next year's performance projections.

With all four major Korean entertainment stocks declining over the past six months despite what analysts describe as strong underlying artist activity and global fan growth, the sector's near-term stock performance appears increasingly tied to how successfully each company can diversify beyond its current flagship acts, particularly for HYBE and JYP, whose concentrated dependence on BTS and Stray Kids, respectively, has left their share prices considerably more exposed than SM's more evenly distributed roster of active groups.