[Click eStock] "Kakao, Q1 Earnings Growth Expected Despite COVID-19"

[Asia Economy Reporter Eunmo Koo] Eugene Investment & Securities assessed that although Kakao is experiencing mixed positive and negative impacts across its business sectors due to the novel coronavirus disease (COVID-19), there is no change to Kakao's core investment points.

Researcher Younghoon Joo of Eugene Investment & Securities estimated in a report on the 2nd that Kakao's sales for the first quarter of this year will reach 888.7 billion KRW, a 25.8% increase compared to the same period last year, and operating profit will increase by 162.1% to 72.5 billion KRW.

He diagnosed that the negative impact related to COVID-19 is concentrated in advertising. Researcher Joo stated, "Since consumer sentiment itself is contracted, companies are being cautious about advertising expenditures," and added, "It is estimated that Kakao's TalkBoard business is also experiencing some withdrawal of major advertisers." However, he forecasted, "With an increase in the proportion of small and medium-sized advertisers, the negative impact is not expected to be significant compared to concerns."

The sectors expected to have positive effects are commerce and paid content. Researcher Joo said, "As the domestic online retail market rapidly grew in February due to avoidance of face-to-face contact, Kakao's commerce sector is also expected to benefit," and added, "In the paid content sector, an increase in webtoon traffic on KakaoPage is anticipated, and the success of the drama 'Itaewon Class,' which utilized KakaoPage webtoon IP, will bring positive effects."

The investment opinion and target stock price were maintained at 'Buy' and 220,000 KRW, respectively. Researcher Joo explained, "It is time to focus on existing investment points such as the decrease in KakaoPay's firm banking fees due to the introduction of real-name accounts, expansion of service areas, and the TalkBoard business, which is expected to rebound quickly when the COVID-19 situation eases, rather than concerns about the slowdown in advertising performance in the first quarter."

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