'Biseulbiseul' Internet Stocks Set Sights on Next Year's Earnings Season

Naver and Kakao Both Decline Compared to Early Month... Avoided in Rotation Market
Q4 This Year and Next Year Earnings Growth Expected... Increased Potential for Rise

[Asia Economy Reporter Minwoo Lee] The stock prices of Naver (NAVER) and Kakao have underperformed the KOSPI's rise, showing a sluggish trend for a month. The downturn continues amid a rotation market favoring small and mid-cap growth stocks. However, since the earnings growth trend that lasted throughout this year is expected to continue into next year, there is analysis that further gains are possible.

As of 9:04 a.m. on the 21st, Naver's stock price recorded 282,000 KRW, down 0.18% from the previous trading day. It fell 1.3% compared to the closing price of 285,500 KRW on the first day of December. After a brief rise to 300,000 KRW on the 7th, it has been on a continuous decline. It started at 2,634.25 on the 1st and has not kept pace with the KOSPI's rise, which reached the 2,700 level for the first time ever. Due to this sluggishness, it fell out of the top 5 in market capitalization rankings since the 2nd. Kakao, also considered a leading internet service stock alongside Naver, has not escaped the downturn. At the same time, it was only up 0.41% from the previous day at 368,500 KRW, down about 1.7% compared to the 1st.

As the rotation market shifts to individual stocks, no particular momentum has emerged, leading to a lull. Lee Kyung-min, a researcher at Daishin Securities, said, "Last week, sectors such as construction, energy, steel, cosmetics and apparel, and shipbuilding, which had poor annual returns and were excluded from the rising phase since last month, showed high returns, while top-performing sectors like healthcare, automobiles, chemicals, and software showed weakness. Especially, the software sector, which received the most attention during the COVID-19 phase, has continued to underperform relatively since August."

However, this sluggishness is expected to be offset by a shift to an earnings-driven market early next year. Both Naver and Kakao are expected to continue improving their earnings in the fourth quarter following the third quarter. According to financial information provider FnGuide, Naver's fourth-quarter earnings consensus for this year is sales of 1.4896 trillion KRW and operating profit of 307.2 billion KRW. Although sales fell 36.78% year-on-year, this is because the results of its Japanese subsidiary Line have been excluded since the third quarter. Considering this, sales are expected to grow by more than 20% year-on-year. Operating profit is also estimated to increase by more than 10% during the same period.

Kakao is expected to show even steeper growth. Its fourth-quarter earnings consensus is sales of 1.2077 trillion KRW and operating profit of 143.6 billion KRW. Sales are up 42.5% and operating profit up 80.3% year-on-year. Notably, the sales gap with Naver is rapidly narrowing. Based on last year's fourth-quarter sales, Naver exceeded Kakao by about 39%, but this is expected to shrink to the 19% range in this year's fourth quarter. KakaoTalk-based business 'TalkBiz' is growing rapidly, and from next year, the listings of subsidiaries such as KakaoBank, KakaoPay (simple payment), and KakaoPage (webtoons and other content) are scheduled, which is expected to continuously increase corporate value. Hwang Seung-taek, a researcher at Hana Financial Investment, predicted, "The recent stock price trend has been in a lull due to lack of momentum, but after the end of the year, market attention to earnings will be renewed, improving investor sentiment."

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