MapleStory And Dungeon & Fighter Will Capture Global Digital Growth

Key Takeaways

• Core franchises and new titles are poised for exponential global growth, with sustained high margins due to scale efficiencies and blockbuster potential.
  
• Proprietary technology and user-generated content platforms will drive engagement, unlock strong network effects, and diversify high-margin recurring revenue streams across new markets.
  
• Overdependence on aging franchises, sluggish global expansion, rising costs, and industry headwinds threaten earnings stability and long-term growth without major new hit titles.

Catalysts

Produces, develops, distributes, and services PC online and mobile games in Japan and internationally.

• Analyst consensus believes international expansion, especially for Dungeon & Fighter and MapleStory, will drive growth, but this may be understated: with sustained triple-digit growth in Korea and breakthrough performances in China and Western markets, Nexon's core franchises are positioned to achieve not just incremental, but potentially exponential user and revenue growth, with higher-than-expected net margins as scale efficiencies are realized.
  
• Analysts broadly expect that new titles like ARC Raiders and The First Descendant can deliver meaningful revenue contributions, but this underestimates the winner-take-most dynamics in global gaming-ARC Raiders' and MapleStory Idle RPG's strong pre-launch metrics suggest these titles could become new global blockbusters, setting new records for monthly active users and generating outsized recurring revenue streams.
  
• The explosive regional adoption of user-generated content platforms, as seen with MapleStory World's sevenfold year-over-year revenue growth in Asia, highlights Nexon's ability to unlock a long-term network effect, which will drive sustained increases in both revenue and average revenue per user as digital entertainment becomes a central part of social and cultural life.
  
• Nexon's deep pipeline of genre-diverse new launches-including global releases of Mabinogi Mobile targeting underserved demographics and geographies-will open new addressable markets, creating multiple engines of recurring, high-margin revenue growth that de-risk reliance on any single franchise and materially accelerate earnings growth.
  
• The company's substantial investments in proprietary technology, such as AI-powered live operations and personalization, will further boost player engagement and monetization efficiency, supporting industry-leading net margins and allowing for rapid scalability as digital device penetration and high-speed internet access continue to accelerate worldwide.

NEXON Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on NEXON compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming NEXON's revenue will grow by 8.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 22.8% today to 24.5% in 3 years time.
• The bullish analysts expect earnings to reach ¥141.9 billion (and earnings per share of ¥186.28) by about August 2028, up from ¥102.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 23.0x on those 2028 earnings, down from 26.1x today. This future PE is lower than the current PE for the JP Entertainment industry at 24.2x.
• Analysts expect the number of shares outstanding to decline by 3.65% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.24%, as per the Simply Wall St company report.

NEXON Future Earnings Per Share Growth

Risks

• NEXON's heavy reliance on aging core franchises like MapleStory and Dungeon & Fighter means long-term growth is at risk, as the company's major revenue drivers are exposed to player base maturity and potential stagnation, leading to limited revenue diversification and possible revenue declines if these titles lose relevance.
  
• Expansion into international markets remains a key strategic priority, yet the company has so far struggled to meaningfully grow outside of core regions such as South Korea, China, and Japan, which exposes NEXON to concentration risk; any economic downturn or regulatory tightening in these markets could significantly disrupt earnings stability.
  
• New title development has proven inconsistent, with recent strong performance resting heavily on content updates for existing franchises rather than clear evidence of sustainable hit creation; reliance on sequels and updates could mean greater R&D and marketing expenses with unpredictable payoff, resulting in net margin pressure and potentially volatile operating income.
  
• Rising operating expenses-including royalty expenses, platform fees, increased payments to creators, and persistent R&D investment-are being forecast even as core franchise revenues are projected to decrease year-over-year, placing ongoing pressure on net margins and diminishing the potential for earnings expansion unless blockbuster new titles deliver material upside.
  
• The broader industry faces significant secular headwinds, such as regulatory scrutiny of in-game monetization, competition from global developers, and changing consumer gaming preferences that increasingly favor shorter, socially immersive, or metaverse-style experiences; failure to quickly adapt NEXON's product pipeline could result in player churn and long-term revenue erosion.

Valuation

• The assumed bullish price target for NEXON is ¥3700.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of NEXON's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ¥3700.0, and the most bearish reporting a price target of just ¥1900.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ¥578.2 billion, earnings will come to ¥141.9 billion, and it would be trading on a PE ratio of 23.0x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of ¥3339.0, the bullish analyst price target of ¥3700.0 is 9.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.