[Click eStock] "Kakao, Should Take a Wait-and-See Approach in the Short Term"

Regulations Affecting the Scope, Depth, and Speed of Platform Businesses
eBest Investment & Securities Lowers Kakao Target Price from 182,000 KRW to 150,000 KRW

[Asia Economy Reporter Gong Byung-sun] It is anticipated that platform business regulations will have a short-term impact on Kakao's operations. Although the stock price has adjusted by about 25% following the regulatory issues, it is still difficult to predict the stock's directional trend.

On the 24th, Ebest Investment & Securities maintained its 'Buy' rating on Kakao but lowered the target price from 182,000 KRW to 150,000 KRW. The previous day's closing price was 115,000 KRW.

The downward revision of Kakao's target price is due to regulations on platform companies. There have been multiple past regulations addressing monopolies and overexpansion of portal platform companies such as Kakao and Naver. In other words, the portal and platform businesses operated by Kakao and Naver have traditionally been conducted within the framework of regulated industries. Naver responded significantly to government regulations by withdrawing from some minor online-to-offline (O2O) businesses and pursuing coexistence with business partners and users. In contrast, Kakao took an aggressive growth strategy in mobility and some O2O businesses by riding the favorable and unprecedented atmosphere toward platform businesses after COVID-19.

From the companies' perspective, they have no choice but to focus on government regulations and public opinion. Platform business regulations targeting big tech companies aim to limit monopolistic practices and the infringement of local businesses caused by overexpansion, serving a strong public interest purpose. Additionally, these regulations align with the general sentiment of the public. Sung Jong-hwa, a researcher at Ebest Investment & Securities, explained, "It is a natural response from Kakao to promptly propose coexistence measures such as discontinuing O2O businesses that have a strong potential to infringe on local businesses."

However, this situation is expected to negatively affect future business operations. Researcher Sung said, "This regulation affects not only platform businesses like mobility and tech-finance but also the scope, depth, and speed of various other platform businesses," adding, "This is a factor that lowers value." The recent adjustment in Kakao's stock price is not merely psychological but largely structural and an inevitable correction.

Furthermore, Researcher Sung emphasized, "Although the stock has adjusted by as much as 25% in the short term after the regulatory issue arose, it is difficult to predict the stock's directional trend until the regulatory issue stabilizes."

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