[Click eStock] "Kakao, Further Stock Price Decline Is Limited... Target Price Down"

[Asia Economy Reporter Song Hwajeong] Shinhan Financial Investment on the 15th lowered the target price for Kakao from 175,000 KRW to 160,000 KRW, stating that the worst situation has passed. The investment rating was maintained as 'Buy.'

Researcher Lee Moonjong of Shinhan Financial Investment said, "We lowered the target price reflecting the recent issues regarding the value of mobility and the decline in Kakao Bank's equity value," adding, "Regulatory issues related to platform businesses closely connected to the daily lives of the entire population may continue until next year's presidential election, but since the stock price has already fallen significantly, further declines are expected to be limited."

Since early September, regulatory issues have emerged across platforms, causing Kakao's market capitalization to evaporate by more than 14 trillion KRW. The researcher explained, "Considering the equity value of Kakao Mobility and Kakao Pay, this may seem excessive, but concerns about Kakao's own scalability and business model have been reflected, and the possibility of regulatory issues intensifying during the National Assembly audit made bottom-fishing difficult," adding, "As the National Assembly audit is concluding and Kakao is presenting various win-win plans, it is judged that the worst phase has passed."

Third-quarter earnings are expected to slightly miss market consensus. Shinhan Financial Investment estimates Kakao's third-quarter revenue to increase by 48.4% year-on-year to 1.63 trillion KRW, and operating profit to rise by 83.1% to 220.1 billion KRW. The operating profit slightly underperforms the consensus of 226.9 billion KRW. The researcher explained, "Talk Biz revenue is expected to be 414.8 billion KRW, up 41.8% year-on-year, and transaction-type business revenue, driven by continued strong performance in commerce and advertising, is expected to increase by 46% to 2.2002 trillion KRW," adding, "Content revenue is estimated to increase by 58.8% to 829 billion KRW due to the success of Kakao Games' 'Odin,' but overall operating expenses will also rise by 44.2% due to a surge in game-related commissions and marketing costs."

The platform growth is expected to continue. The researcher said, "Even if regulatory measures are introduced, users will find it difficult to leave the platform from the perspective of convenience," adding, "Unless the business is prohibited, platform growth will continue."

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