[Into the Stock] Kakao's 'Win-Win Plan' Target Price 'Downgraded'

Kakao Proposes
Alleyway Market Coexistence Plan Amid Government Regulation
But Market and Securities Remain Unmoved

[Asia Economy Reporter Hwang Junho] Although Kakao announced a 300 billion KRW scale coexistence plan for local businesses, the market's reaction remains lukewarm. The short-selling transaction amount is the highest among listed companies, and the stock price response is weak. With the national audit approaching, there is also a view that it is insufficient to blunt the regulatory blade, leaving the stock price trapped in uncertainty.

According to the Korea Exchange on the 16th, Kakao Bank's short-selling transaction amount was 51.627 billion KRW, the highest among KOSPI-listed stocks. Kakao also ranked third with 27.615 billion KRW, following SK Hynix (36.367 billion KRW). From the 8th to the 14th, over six trading days, except for the 9th, Kakao Bank and Kakao consistently ranked in the top three for short-selling transaction amounts, and there was no significant change on the 15th either.

Although the coexistence plan was announced on the 14th, the market is analyzed to have bet on a stock price decline. The increase in short-selling volume is attributed to the view that the plan will not play a significant role in blocking the government's comprehensive regulations.

The stock price showed a similar pattern. Kakao's stock price fell 4.23% on the 13th, declined by 0.40% on the 14th, and further dropped 1.21% on the 15th. The closing price on the 1st of this month was 154,000 KRW, but it traded at 123,000 KRW during the session on the 15th. Kakao Bank, which was directly sanctioned by financial authorities, rose 7.89% on the 14th, ending a downward trend of 26.59% over the past eight trading days and showing signs of preparing for a new phase. However, it fell 1.00% on the 15th, casting doubt on the effectiveness of the coexistence plan.

The securities industry's reaction to the coexistence plan is similar. Global investment bank Morgan Stanley issued a report titled "Kakao Announces Withdrawal from Some Mobility Businesses," setting a target price of 130,000 KRW but changing the buy rating to 'underweight.' It stated that whether Kakao's announcement of withdrawing from major mobility businesses, made to compromise with recent political regulations, is sufficient to calm the situation remains to be seen. Especially with the national audit season about to begin, Kakao may have to make further concessions. There is a possibility that potential excess supply due to regulations could increase.

Hanwha Investment & Securities also forecasted that Kakao's stock price will show volatility depending on government regulation-related news flow for the time being and lowered the target price from 185,000 KRW to 170,000 KRW. Researcher Kim So-hye said, "Kakao's stock price has fallen 28% from its peak, reflecting various regulatory concerns." However, "Considering that Kakao has increased corporate value by successfully monetizing new business areas, short-term momentum is expected to be weak, and the expansion of Kakao Pay and Kakao Mobility, which are preparing for IPOs, may be somewhat hindered, which is regrettable," she analyzed.

Samsung Securities also lowered the target price from 200,000 KRW to 180,000 KRW. Samsung Securities researcher Oh Dong-hwan said, "The market expects regulatory issues to ease due to Kakao's proactive responsibility enhancement announcement, but risks remain due to issues such as franchise taxi commissions, dispatch concentration, and governance, so the possibility of continued risk exists," adding, "Expectations for growth speed need to be adjusted."

On the other hand, there is also a view that the sharp stock price decline so far has already reflected these regulatory issues. JP Morgan maintained a target price of 170,000 KRW and an overweight investment opinion on Kakao. Researcher Stanley Yang said, "The impact of government regulations will continue for some time but has already been largely priced in," and "Although regulatory pressure on Kakao may continue until next year's presidential election, the operational impact of negative regulatory strengthening on dominant platform companies is limited," maintaining his previous view.

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