[Click eStock] AfreecaTV Sees Increase in Paid Users but Advertising Revenue Slumps Due to COVID-19

2Q Operating Profit Expected to Decline 10% Year-on-Year

[Asia Economy Reporter Minwoo Lee] Despite AfreecaTV increasing the proportion of paid users, there are forecasts that its second-quarter performance will be sluggish. This is attributed to the advertising business, which accounts for 20% of sales, being affected by the novel coronavirus disease (COVID-19).

On the 9th, Ebest Investment & Securities predicted that AfreecaTV would achieve sales of 43 billion KRW and an operating profit of 8.6 billion KRW in the second quarter of this year. While sales are expected to increase by 3.4% compared to the same period last year, operating profit is projected to decrease by 10.4%, falling short of market consensus.

In particular, the decline in advertising revenue was significant. It is expected to drop by 21% year-on-year to 4.9 billion KRW. Hyonyong Kim, a researcher at Ebest Investment & Securities, said, "Advertising, which accounts for 20% of sales, was severely impacted by COVID-19, causing both platform advertising and content advertising to continue weakening. However, from the fourth quarter, with the recovery of the advertising market, the effect of the peak season, and the visible impact of policies to expand the paid user base on the platform, performance is likely to turn upward compared to the same period last year."

On the other hand, the platform itself is navigating steadily. Despite the monthly unique visitors (MUV) stagnating in the low 6 million range over the past three years, platform sales grew from 79.2 billion KRW in 2017 to 128.5 billion KRW in 2019, an average annual growth rate of 27.4%. This is because both the proportion of paid users and the average revenue per paying user (ARPPU) increased. Researcher Kim explained, "Starting this year, to increase the paid user base itself, we are strengthening user benefits and point systems such as user clips and ad balloons. The proportion of paid users relative to MUV has maintained a solid trend, rising from the high 30% range in 2019 to the low 40% range currently."

Meanwhile, Ebest Investment & Securities did not provide either an investment opinion or target price for AfreecaTV (NR). The closing price on the previous day was 60,600 KRW. Researcher Kim advised, "Currently, the stock is trading at a price-to-earnings ratio (PER) of about 20.5 times, which is reasonable considering forward growth potential. However, judging from the earnings outlook, it seems that the untact (non-face-to-face) benefits received by the platform business do not overwhelmingly cover the advertising business's sluggishness. The best time to buy would be ahead of the fourth quarter, when a clear recovery in performance is expected due to fundamental recovery and base effects."

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