I asked AI why Cover Corp stock is declining:
>Cover's decline stems from talent instability (a core revenue driver), earnings shortfalls vs. expectations, heavy investments eroding short-term profits, and broader market pressures. VTubers account for ~70% of revenue, so graduations hit hard.
>1. Wave of Talent Graduations (Primary Catalyst): Hololive has seen a "graduation rush" since late 2024, eroding investor confidence in talent retention and IP sustainability.
>Key events:
>Aug 2024: Minato Aqua graduates (disagreements with management).
>Oct 2024: Amelia Watson leaves.
>Jan 2025: Ceres Fauna and Sakamata Chloe exit.
>Apr 2025: Murasaki Shion and Nanashi Mumei depart; Gawr Gura (Hololive EN's biggest star with 4M+ subscribers) announces graduation effective May 1, 2025, citing "disagreements with company direction and management."
>Impact: Gura's exit alone caused a 10% single-day plunge from ¥2,366 to ~¥2,130 on April 16, 2025.
>X posts amplified panic, with users noting "talent dependency" and calling for business restructuring.
>Broader concern: Stress on remaining talents fuels rumors, like a baseless September 2025 "Pekora graduation" hoax that briefly dipped the stock.
>2. Earnings Disappointments and Growth Slowdown:
>Q1 FY2026 (Apr-Jun 2025): Revenue up 50.1% YoY to ¥96.29B, boosted by the "Hololive OFFICIAL CARDGAME" (merchandising +64.6% to ¥205B). However, operating margins fell due to investments in new projects, leading to a 14% drop despite the beat.
>Full FY2025 (ending Mar 2025): Profits grew but missed analyst targets for double-digit surges, triggering sell-offs.
>Forward guidance: Unchanged full-year forecasts emphasize long-term goals (¥100B revenue, ¥25B profit by 2030), but "slowing growth" perceptions persist.
>3. Post-IPO Pressures and Management Shifts:
>Going public enabled a ¥2B studio for 3D streams but shifted focus to shareholders, allegedly straining talents via aggressive "idolization" (e.g., more events, less creative freedom).
>June 2025: Halted Prime Market upgrade (from Growth) due to delays and amendments, signaling internal hurdles.
>X sentiment: Critics blame public status for "ruining" Hololive, with calls to prioritize talents over investors.
>4. Macro and Sector Factors:
>Competition: Rivals like AnyColor (Nijisanji) erode market share in a maturing VTuber space.
>Economic Headwinds: Yen weakness and global slowdowns hit discretionary spending on fan content. Entertainment stocks are "risk-off" targets.
>Outlook and Risks
>Positive Signals: Strong Q1 revenue from cards/events; Morningstar's 4-star rating notes improved fundamentals. Upcoming catalysts: Holofes, Budokan concerts, potential new gen debuts could rebound sentiment.
>Risks: More graduations (e.g., ongoing rumors) or missed FY2026 targets could push to ¥1,500 lows. Long-term, diversification is key.
>Investor Take: At ¥1,950, it's ~25% below fair value estimates (Simply Wall St), appealing for long-term VTuber believers. Short-term, volatility persists—monitor November 6 earnings.
