[Edaily Reporter Park Soon-yeop] Amid the entertainment and leisure sector’s neglect by the market, forecasts suggest that business conditions and earnings growth could begin to pick up in earnest starting in the second quarter. Although stock prices have undergone a significant correction, foreign-owned casinos are benefiting from the recovery in inbound tourism and the peak season effect, while entertainment stocks could see a rebound in the second half driven by artist activities and merchandise sales growth, according to the analysis.
In a report published on the 9th, Lee Hyun-ji, an analyst at Eugene Investment & Securities, maintained an “Overweight” investment rating for the entertainment and leisure sector, stating, “Although the sector currently appears to have low relative appeal in the market, valuations are at historical lows, and a full-scale improvement in business conditions and earnings growth is expected to begin in the second quarter.” She noted, “We need to shift from indifference to interest,” and recommended #HYBE and #Paradise as top picks.

In the leisure sector, the recovery of foreigner-only casino earnings is drawing attention. In the recently released May earnings for foreigner-only casinos, #LotteTourismDevelopment saw steady growth in metrics such as visitor numbers, but its stock price underperformed as net sales fell short of market expectations. In contrast, #Paradise and #GKL announced better-than-expected results, causing their stock prices to rise by about 10% over two days. Analysts assess that the benefits from inbound tourism are continuing, as visitor metrics have maintained an upward trend even after Japan’s Golden Week in early May.
The analyst predicted that the peak season, which begins in the second quarter and extends through the third, will lead to a full-scale recovery in casino business conditions and earnings. Nevertheless, the analyst believes that these expectations have not been fully reflected in stock prices. Year-to-date stock returns for the four leisure companies were as follows: Lotte Tour Development -25.2%, Paradise -11.2%, GKL -21.4%, and Kangwon Land -20.5%. Although stock prices have been sluggish, analysts note that the downside is being supported by the materialization of new investment catalysts, such as expectations of continued benefits from inbound tourism, expanded rolling revenue, and increased comp capacity.
There is also an assessment that the leisure sector entered a period of structural growth starting last year. The analyst explained, “The leisure sector entered a period of structural growth starting in 2025, leading to simultaneous growth in stock prices and earnings,” adding, “If earnings growth capable of sustaining the benefits of the industry’s favorable conditions is demonstrated, a re-rating is entirely possible.” Lotte Tour Development’s expansion of VIP customer acquisition through increased rolling, and Paradise’s expansion of comp capacity through the acquisition of Hyatt, were cited as factors driving both quantitative and qualitative growth.
The entertainment sector shows even more pronounced stock price weakness. HYBE has fallen 42.9% year-to-date, #SM Entertainment 46.3%, #JYP Entertainment 35.4%, and #YG Entertainment 42.5%. It has been pointed out that stock prices are not reacting, even though first-quarter earnings were relatively solid—contrary to initial concerns—and substantial earnings growth is expected starting in the second quarter. Regarding the difference between the leisure and entertainment sectors, the analyst noted, “In the leisure sector, stock prices react to strong earnings, but in the entertainment sector, stock prices do not react even when strong earnings are reported.”
However, analysts note that the nature of this recent decline in entertainment stocks differs from the downturn in 2024. While poor earnings were the primary cause of the stock price decline in 2024, the current situation is characterized by continued stock underperformance due to a decline in valuation multiples themselves, even amid forecasts of record earnings. Consequently, it is judged that a simple one-off earnings surprise will not be sufficient to restore valuation multiples, and sustainable growth drivers are necessary.
Conditions for a recovery in the entertainment sector’s multiples include robust growth in merchandise (MD) sales, the comeback of fifth-generation artists with fewer years in the industry who are monetizing more quickly, and momentum from new artists. Although this year has seen an unusually high concentration of comebacks by veteran artists, the diversification of merchandise sales regions and product categories compared to last year, along with the expansion of licensing, was viewed positively. The analyst anticipated a rebound in entertainment stocks in the second half of the year, driven by the combination of merchandise sales growth, fifth-generation artists, and momentum from new artists.
In the media and content sector, the possibility of a second-half rebound for #SAMG Entertainment was also mentioned. SAMG Entertainment’s stock price fell nearly 40% after the company reported first-quarter earnings that fell short of expectations. However, with the Children’s Day effect and the movie release date confirmed for August 5, the outlook suggests that earnings and a stock price rebound could gain momentum in the second half.
The analyst stated, “In the leisure sector, a rebound in earnings and stock prices is expected starting in the second quarter,” adding, “In the entertainment sector as well, a stock price rebound is anticipated in the second half, driven by growth in merchandise sales and momentum from fifth-generation artists or newcomers.”