Nomura upgrades Pearl Abyss stock to Buy on Crimson Desert potential

Nomura/Instinet upgraded Pearl Abyss Corp. to Buy, despite lowering its price target to KRW35,000 from KRW37,000 and the delay of its anticipated game Crimson Desert to Q1 2026. Nomura views the delay as operational rather than developmental, though it prompted revised 2025 net loss forecasts and reduced 2026 EPS estimates due to shifted marketing expenses. The new price target is based on 15x 2026 forecast earnings, reflecting a 20% discount to peer multiples due to lower launch visibility, with the stock currently trading at 13x.

Analysis

Nomura/Instinet has upgraded Pearl Abyss Corp. to Buy from Neutral, while paradoxically lowering its price target to KRW35,000 from KRW37,000. The upgrade is predicated on the view that the delay of the key title, Crimson Desert, to Q1 2026 is operational—related to localization and certification—rather than a more fundamental developmental setback. This delay has prompted a negative revision to the firm's financial model, with a net loss now forecast for 2025 and reduced 2026 earnings per share estimates to reflect marketing costs shifting into the launch quarter. The new price target is derived from a 15x multiple on 2026 forecast earnings, a significant reduction from the prior 23x basis. This multiple incorporates a 20% discount to the peer average, which Nomura justifies due to lower visibility on the game's launch timeline. With the stock currently trading at 13x 2026 forecast earnings, Nomura's upgrade signals a belief that the market has overly penalized the stock for the delay, creating a compelling valuation entry point ahead of potential catalysts in 2025, including a consumer demo and an official launch date announcement.

Key Decisions for Investors

• Investors should consider the upgrade to 'Buy' as a long-term value play, based on the stock trading at 13x 2026 forecast earnings, a discount to both Nomura's 15x target multiple and the broader peer group.
• The primary risk to weigh is execution, as the investment thesis hinges on the 'Crimson Desert' launch delay being purely operational and on the company meeting its timeline for a 2025 demo and launch announcement.
• Monitor for key catalysts before December 2025, specifically the consumer demo and the official launch date confirmation, as positive developments here could significantly de-risk the stock and narrow the valuation gap.