Webtoon soars on deal to create digital comics platform for Disney brands

Shares of South Korean online comics platform Webtoon Entertainment jumped nearly 40% yesterday, September 16, after the company announced plans to develop a digital comics platform with Walt Disney and agreed to sell a 2% equity stake to the media group.

Webtoon Entertainment shares surged 39% to close yesterday at $20.80 per share, buoyed by the announcement of a deal to create a digital comics platform with Disney. At one point, the stock reached $21.30 per share, the highest level this year. In premarket trading today, the shares have given back 2.8%.

According to Webtoon, the new service will unite more than 35,000 comics from Disney franchises, including Marvel, Star Wars, Pixar and 20th Century Studios, and make them available for a single subscription. As part of the agreement, Disney will also acquire a 2% equity stake in Webtoon, though the valuation of the transaction was not disclosed.

The deal expands on the partnership announced on August 12, when the companies said Webtoon would reformat nearly 100 of the most popular comics into a vertical format optimized for smartphones. The first titles from the Star Wars, Spider-Man, Avengers and Alien universes will appear in the Disney app.

Together, the two announcements about Disney’s partnership with Webtoon have pushed the company’s stock price up 122% between August 12 and September 16.

Deutsche Bank analyst Benjamin Black said the deal may also help boost interest from other IP owners looking to follow Disney’s lead. “The new agreement further validates Webtoon’s platform as the preferred destination for major IP distribution,” Black wrote to clients.

Morgan Stanley analyst Matthew Cost was skeptical of the immediate impact of the deal on Webtoon’s near-term earnings, pointing to the need to invest in order to build out the new platform. Webtoon is still developing the mobile app and back-end infrastructure to support this project, with no firm release date in the books yet, the Motley Fool notes.

Evercore ISI raised its price target for Webtoon to $23.00 per share, maintaining an "outperform" rating, while Goldman Sachs increased its target price to $15.00 per share with a "buy" rating. Both firms attributed these upgrades, Investing.com reports, to the strategic partnership with Disney and Webtoon’s strong earnings performance. 

According to MarketWatch, six of the nine analysts covering the stock rate it a "buy," while three recommend "hold." Their average target price of $19.80 per share now sits below current quotes following the rally.

Webtoon is controlled by the South Korean internet giant Naver. The platform lets users read, create, publish, and share comics (webtoons). It partners with external publishers for licensed web novels, and also sells official merchandise based on its works.   

In June 2024, Webtoon listed on the Nasdaq at the upper end of the marketed price range of $21 per share. At the time, Webtoon had about 170 million monthly active users in more than 150 countries, including 7.7 million U.S. users. Its main markets are South Korea and Japan, which account for 27% of global readership, the FT wrote last year.

For the second quarter, the company reported that monthly active users declined to 155 million. However, revenue rose 8.7% year over year to $348.3 million, exceeding analysts’ forecasts, Investing.com noted. About 70% of Webtoon’s revenue came from Japan and South Korea.

The AI translation of this story was reviewed by a human editor.