[Click eStock] Naver, Gradually Approaching from a Buy Perspective "Target Price Lowered"

[Asia Economy Reporter Lee Seon-ae] Korea Investment & Securities announced on the 2nd that it maintains a buy rating on Naver (NAVER) but lowers the target price by 11.1% to 400,000 KRW. The downward revision of the target price is due to the decline in stock prices of global peers, leading to a downward adjustment of the valuation applied to the search platform and commerce sectors. However, based on the 12-month earnings estimates, the price-to-earnings ratio (PER) is 28.3 times, and from a PER perspective, the downside risk is not considered significant. They emphasized that if the stock price falls further, it can be approached from a buying perspective.

Jung Ho-yoon, a researcher at Korea Investment & Securities, stated, "Although Snap lowered its 2022 earnings guidance, raising concerns about the slowdown in the global digital advertising market, domestic companies like Naver do not need to be overly concerned about these worries." He explained, "Big tech companies are directly affected by the negative impacts of the Russia-Ukraine war, and the strong dollar also negatively affects sales outside the U.S., but Naver had a high base growth rate in the search platform in 2021, so there is no need to worry about a slowdown in growth."

He particularly expects that double-digit advertising revenue growth can be maintained in 2022. Profit growth is expected to recover due to reduced cost burdens. Costs have a significant impact on operating profit growth in 2022. Although the revenue growth rate was very high at 28.5% in 2021, the increase in labor and marketing expenses exceeded the cost growth rate, resulting in a low profit growth rate of 9.1%.

He added, "Naver's revenue growth rate this year is estimated to decline by 6.6 percentage points from the previous year to 21.9%, but due to a slowdown in the increase of fixed costs such as labor costs, operating profit growth is expected to rise by 5.0 percentage points to 14.1%."

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