Increasing Regulation And Costs Will Erode Digital Platform Prospects

Key Takeaways

• Increased regulatory scrutiny and changing user attitudes are limiting Soop's data-driven ad revenue, while cultural barriers are slowing platform growth and retention.
  
• Rising content and compliance costs amid intense competition are pressuring margins, with audience fragmentation reducing Soop's ability to scale and monetize effectively.
  
• Investments in AI, global expansion, branding, and acquisitions are enhancing user growth, market reach, and long-term profitability amid strong advertising demand.

Catalysts

Operates as an entertainment company in South Korea.

• The persistent rise of regulatory scrutiny and evolving data privacy laws across key international markets are likely to limit Soop's ability to collect and monetize user data effectively. This will directly constrain the platform's long-term advertising revenue potential as targeted ads become less efficient, resulting in weaker revenue growth and thinner earnings.
  
• Despite management's attempts to stimulate global engagement and simulcasting, growing consumer fatigue with digital platforms and increased skepticism about online ecosystems may erode user loyalty over time. This trend, paired with cultural and language barriers in new markets, threatens to slow audience growth, depress retention rates, and undermine top-line revenue expansion.
  
• As Soop heavily invests in expanding its streamer support programs, AI tools, and branded content, escalating content production and employment costs-already up by double digits year-on-year-are likely to pressure net margins, making sustainable profitability increasingly difficult to achieve as revenue growth decelerates.
  
• Intensifying competition from major global platforms and local challengers, combined with rising compliance and content moderation costs, is expected to drive user acquisition costs ever higher and compress industry-wide ad yields, threatening both Soop's market share and its profitability.
  
• The global trend of fragmented digital audiences and a shift toward niche or decentralized platforms limits the potential for long-term platform consolidation. This reduces Soop's ability to fully leverage scale, capping both the addressable user base and future monetization rates, ultimately suppressing long-term revenue and earnings.

Soop Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Soop compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Soop's revenue will grow by 10.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 24.2% today to 21.2% in 3 years time.
• The bearish analysts expect earnings to reach ₩122.1 billion (and earnings per share of ₩10525.56) by about July 2028, up from ₩103.3 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 bearish analyst cohort, the company would need to trade at a PE ratio of 8.4x on those 2028 earnings, down from 9.6x today. This future PE is lower than the current PE for the KR Interactive Media and Services industry at 20.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.17%, as per the Simply Wall St company report.

Soop Future Earnings Per Share Growth

Risks

• Continued investment in innovative AI features like SOOPi, Savic, and SARSA is improving content creation ease, user experience, and streamer retention, which could drive higher average revenue per user and support both revenue expansion and stronger operating margins.
  
• Global expansion efforts are showing early traction, with increasing numbers of international streamers, growing organic user intake in key markets like Taiwan and Thailand, and culturally localized content strategies that may unlock new, high-growth revenue streams and expand Soop's addressable market.
  
• The successful launch and anticipated scale of a large multi-channel branding campaign, Soop Adventure, is likely to enhance brand recognition, attract new streamers and viewers, and could lead to user and revenue growth beyond current expectations.
  
• Strategic acquisitions such as PlayD are expected to provide significant synergy benefits, broaden Soop's advertising capabilities, and boost both top-line revenue and profitability as its operations become fully integrated throughout the year.
  
• Despite seasonal advertising soft spots, platform ad revenue and branded content ads showed substantial year-over-year growth, and management expects further gains tied to eSports and visible radio content, suggesting the underlying long-term advertising demand remains robust and should help drive future earnings growth.

Valuation

• The assumed bearish price target for Soop is ₩81243.97, which represents two standard deviations below the consensus price target of ₩130263.16. This valuation is based on what can be assumed as the expectations of Soop's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩170000.0, and the most bearish reporting a price target of just ₩75000.0.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₩576.2 billion, earnings will come to ₩122.1 billion, and it would be trading on a PE ratio of 8.4x, assuming you use a discount rate of 8.2%.
• Given the current share price of ₩93300.0, the bearish analyst price target of ₩81243.97 is 14.8% lower. Despite analysts expecting the underlying buisness to improve, they seem to believe the market's expectations are too high.
• 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.