[Click eStock] Naver, Advertising Declined Due to Corona... E-commerce and Webtoon in 'Super Boom'

E-commerce Sales Rise Amid COVID-19... Webtoons Also Growing Globally
Naver Financial to Fully Launch Financial Products in Second Half... Business Model Revamp Focused on New Industries

[Asia Economy Reporter Minwoo Lee] Naver (NAVER) is expected to grow sharply as the year progresses. Although advertising revenue declined due to the impact of the novel coronavirus disease (COVID-19), the e-commerce and webtoon sectors actually benefited. It is analyzed that with the full-scale launch of financial products through Naver Financial in the second half of the year, not only will performance improve, but the company’s structure can also shift from being advertisement-centered to focusing on new businesses.

On the 25th, Mirae Asset Daewoo estimated that Naver would record sales of 1.745 trillion KRW and operating profit of 181 billion KRW in the first quarter of this year. Compared to the same period last year, sales increased by 15.5%, but operating profit decreased by 12.3%.

Specifically, advertising revenue contracted more than expected. The year-on-year sales growth rate was 2.8%, significantly lower than 10.8% in the fourth quarter and 6.8% in the first quarter of the previous year.

However, e-commerce and webtoons experienced a "super boom." First-quarter e-commerce sales (transaction fees + related advertising) increased by 30% compared to the same period last year. Since the impact of COVID-19 on e-commerce transaction volume began to be reflected in mid-February, it is analyzed that the growth rate will be even steeper in the second quarter.

Naver Webtoon is interpreted as having used the COVID-19 crisis as a stepping stone for growth in the global market. Weekly transaction volume of Naver Webtoon in the U.S. increased by 15% this month compared to January and February. The number of downloads of the Naver Webtoon application (app) has surged not only in the U.S. but also in France and South America this month.

Significant changes in performance are expected from the second half of the year. The merger of Line, which has deteriorated consolidated profitability since 2018, with Z Holdings is imminent, and the sales composition is also changing.

First, while the growth of mobile advertising, which has driven performance improvement over the past decade, is slowing, the proportion of e-commerce sales is increasing. In the business platform sales segment, where cost-per-click (CPC) search advertising revenue and e-commerce sales are both accounted for, the share of e-commerce sales was 10% at the beginning of last year but is expected to rise to 20% this year. Meanwhile, the financial subsidiary Naver Financial is preparing to launch full-scale financial product sales from the second half of the year. Additionally, the content service segment, where webtoon sales?which are growing faster overseas than domestically?are recorded, is also expected to rise sharply in sales proportion.

Mirae Asset Daewoo gave Naver a "Buy" investment rating with a target price of 241,000 KRW. The closing price the previous day was 156,000 KRW. Changkwon Kim, a researcher at Mirae Asset Daewoo, said, "The impact of the COVID-19 crisis on Naver’s earnings outlook is limited," adding, "Rather, a positive business environment is expected for non-face-to-face businesses such as e-commerce, webtoons, and financial platforms."

This content was produced with the assistance of AI translation services.