Hybe's shares fell sharply by 16.09% on Tuesday and continued to decline by 16.31% on Wednesday, resulting in a market cap loss of approximately 2.845 trillion won ($1.96 billion).
This decline was attributed to a miss in profit-margin expectations, even though the company reported record highs in revenue and operating profit, driven largely by concert revenues that surged 243.3% year-on-year and 630% quarter-on-quarter, thanks to BTS' Arirang tour.
Analysts noted that while concert revenues are substantial, they come with higher payouts to artists, leading to lower profit margins. Hybe's operating margin for the second quarter was reported at 11.8%, falling short of expectations set by SK Securities and Eugene Securities, which anticipated margins of 12.7% and 12.2%, respectively.
Analysts from SK and IM Securities highlighted that the increased share of concert revenue has raised artist-settlement costs, impacting overall profitability. The market had hoped for stronger margins from merchandise sales, which can reach up to 50%.
Despite the stock's poor performance, analysts remain optimistic about Hybe's future, citing the potential for increased merchandise production and the expansion of tours, particularly from new groups like Cortis and Katseye, as well as the return of the successful girl group NewJeans, which is still under contract with Hybe's subsidiary ADOR until 2029