[Click eStock] "Naver, Should Emphasize Trend Growth Factors"

Yuanta Securities Issues 'Buy' Investment Opinion and Sets Target Price at 220,000 Won... Closing Price on 20th at 154,000 Won

[Asia Economy Reporter Kum Boryeong] It has been suggested that more weight should be placed on trend growth factors rather than short-term impacts regarding NAVER.

On the 23rd, Yuanta Securities revised down its revenue estimates for NAVER's advertising and business platform segments by 7.2% and 5.8%, respectively. The year-on-year growth rates were also adjusted to single-digit growth of 3% and 5%, respectively.

Advertising revenue is inevitably declining due to the economic downturn. The impact, which began in earnest in February, is expected to be greater in the second quarter than in the first quarter. Business platform revenue is partially offset by increased shopping-related sales, but since the proportion of search advertising revenue is higher than shopping, negative effects cannot be avoided.

However, it is an analysis that now is the time to focus on trend growth factors. Lee Changyoung, a researcher at Yuanta Securities, explained, "The 'Live Store' that NAVER started with Hyundai Department Store on the 19th of last month generated sales equivalent to 10 days within 2 hours. It plans to expand to about 200 brands in the future," adding, "The Untact consumption culture, which is further strengthened by the novel coronavirus disease (COVID-19), is expected to further reinforce NAVER's 'shopping-search-finance (payment)' ecosystem."

Yuanta Securities maintained a 'Buy' investment rating on NAVER but revised the target price downward to 220,000 KRW from the previous level. The closing price on the 20th was 154,000 KRW. The researcher analyzed, "Due to NAVER's business model characteristics with a high proportion of economically sensitive advertising, a short-term decline in performance is inevitable," but emphasized, "The long-term growth potential of the Untact business sectors (commerce, webtoons, etc.), which can offset these negative factors, could rather become a catalyst for faster growth, and the relatively low proportion of overseas earnings means it is less affected by the global economic downturn."

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