Stock Analysis & Valuation NEXON Co., Ltd. (3659.T)

• Previous Close: ¥3,683.00
• Sector Valuation Confidence Level: Low

Valuation method	Value, ¥	Upside, %
Artificial intelligence (AI)	1618.29	-56
Intrinsic value (DCF)	1449.94	-61
Graham-Dodd Method	1792.82	-51
Graham Formula	2151.12	-42

Strategic Investment Analysis

Company Overview

NEXON Co., Ltd. (3659.T) is a leading global developer and publisher of online and mobile games, headquartered in Tokyo, Japan. Founded in 1994, NEXON operates across key markets including Japan, Korea, China, and North America, offering a diverse portfolio of approximately 60 games in 190 countries. The company is best known for iconic titles such as MapleStory, Dungeon & Fighter, and EA SPORTS FIFA ONLINE 4, which have cultivated loyal player bases and recurring revenue streams. NEXON specializes in free-to-play games monetized through in-game purchases, leveraging its expertise in live-service operations and content updates. As a major player in the Electronic Gaming & Multimedia sector, NEXON benefits from the growing global demand for interactive entertainment, particularly in Asia. The company’s strong IP portfolio and multi-platform strategy position it well in the competitive gaming industry.

Investment Summary

NEXON presents a compelling investment case due to its strong portfolio of evergreen game franchises, particularly in the Asian market where it holds dominant positions. The company’s revenue stability is supported by recurring in-game spending, with a solid financial profile (JPY 134.8B net income in FY 2023) and healthy cash reserves (JPY 331.9B). However, risks include reliance on a few key titles (e.g., MapleStory, Dungeon & Fighter) and exposure to regulatory pressures in China and Korea. The stock’s low beta (0.44) suggests defensive characteristics, but growth depends on successful new game launches and expansion in Western markets. The dividend yield (~1.1%) adds modest income appeal.

Competitive Analysis

NEXON’s competitive advantage lies in its deep expertise in live-service game operations, particularly in the MMORPG and online multiplayer segments. Its flagship titles, such as MapleStory and Dungeon & Fighter, have demonstrated remarkable longevity, with decades of player engagement—a rarity in the gaming industry. The company’s focus on free-to-play monetization in Asia aligns well with regional market preferences. However, NEXON faces intense competition from global gaming giants like Tencent and NetEase in China, as well as from mobile-first developers such as Krafton. While NEXON has a strong foothold in Korea and Japan, its presence in Western markets remains limited compared to rivals like Electronic Arts or Activision Blizzard. The company’s R&D investments (JPY 36.4B in capex) aim to bolster new IP development, but execution risks persist given the hit-driven nature of the industry. Its asset-light model and partnerships (e.g., with EA for FIFA ONLINE 4) provide scalability but also create dependency on third-party IP.

Major Competitors

• Tencent Holdings Ltd. (0700.HK): Tencent dominates the global gaming market with titles like Honor of Kings and PUBG Mobile, backed by its vast ecosystem (WeChat, QQ). Its strengths include unparalleled scale in China and aggressive mobile game expansion. However, regulatory scrutiny in China and reliance on domestic revenue pose risks. Compared to NEXON, Tencent has broader diversification but less focus on PC online games.
• NetEase, Inc. (9999.HK): NetEase is a key rival in China with hits like Fantasy Westward Journey and collaborations with Blizzard (prior to 2023). It excels in PC and mobile RPGs, similar to NEXON, but faces higher regulatory exposure. NetEase’s stronger R&D pipeline contrasts with NEXON’s reliance on legacy titles.
• NCSoft Corporation (259960.KS): NCSoft competes directly with NEXON in Korea’s MMORPG segment (Lineage, Guild Wars). It has a robust PC gaming legacy but struggles with mobile transition. NCSoft’s weaker international presence compared to NEXON limits growth outside Korea.
• Electronic Arts Inc. (EA): EA leads in Western markets with franchises like FIFA and Apex Legends. Its strengths include sports IP and console/pc dominance, but it lags in Asian free-to-play markets where NEXON excels. EA’s higher reliance on AAA titles makes it more volatile than NEXON’s service-based model.
• Krafton Inc. (KRX: 259960): Krafton is known for PUBG, a global battle royale phenomenon. It outperforms NEXON in mobile and Western markets but lacks NEXON’s diversified portfolio. Krafton’s hit-driven model is riskier than NEXON’s stable revenue from legacy games.