[Click eStock] "Kakao, the next growth engine is Open Chat"... Securities firms 'maintain' target price

[Asia Economy Reporter Ji Yeon-jin] Securities firms recently maintained buy ratings and target prices for Kakao, which has been in a prolonged slump, citing 'Open Chat' as the next growth engine.

According to the financial investment industry on the 13th, Kakao held an 'Analyst Day' for securities researchers on the 8th to share its future growth strategy. The core content was the expansion of the advertising business based on Open Chat.

Open Chat is a message-based community service on KakaoTalk, where anyone can freely create an open chat room and chat with an unspecified number of people. While regular chats are conversations based on acquaintances, Open Chat is based on non-acquaintances who do not use real names. The difference from regular chats is that it is a chat among people with the same interests. The monthly average number of KakaoTalk users in Korea is about 47.4 million, while the monthly average number of Open Chat users is around 9 million.

In a report published on the same day, Korea Investment & Securities forecasted that while KakaoTalk ads are currently only displayed at the top of the chat room list, Open Chat is expected to expand advertising inventory. Since Open Chat rooms are non-acquaintance chat rooms gathered based on interests, there is less resistance to ads, and the advertising targets are clear, allowing various forms of ad exposure.

Jung Ho-yoon, a researcher at Korea Investment & Securities, said, "One of the key factors driving Kakao's high growth in sales and profits since 2020 has been the expansion of Biz Board advertising revenue," adding, "Open Chat rooms have various advantages as advertising inventory, so if the advertising business is fully launched, it could lead to another increase in sales." Jung emphasized, "Although it will take time for the business to activate, if it settles, it can be an important trigger for stock price increases."

Yoon Ye-ji, a researcher at Hana Financial Investment, also said, "Open Chat has a strong character as a taste-based social media (SNS) distinct from regular KakaoTalk and has the advantage of being specialized in real-time communication," adding, "Such non-acquaintance, non-purpose social services have greater potential to expand advertising business models compared to KakaoTalk's existing private services."

Kim Jin-woo, a researcher at Daol Investment & Securities, said, "According to a survey on community platforms used by age group, KakaoTalk Open Chat rooms ranked first in usage among teenagers, differentiating it from global SNS services struggling to attract younger new users," adding, "Expanding interest-based communities can improve not only ad space but also the efficiency of contextual advertising."

However, Kim maintained this year's and next year's earnings estimates and the existing target price of 120,000 won, as monetization of Open Chat rooms is still in the preparation stage. Korea Investment & Securities and Hana Financial Investment also maintained their target prices for Kakao at 125,000 won and 135,000 won, respectively.

Meanwhile, Kakao has been in a slump since the beginning of this year as investment sentiment toward growth stocks has weakened due to the start of monetary tightening such as U.S. interest rate hikes. As of the closing price on the 10th, the stock price has halved (down 48.98%) compared to last year's peak (173,000 won), and the year-to-date return is -24.08%. Foreign investors have net sold about 1.2 trillion won worth of Kakao shares since the beginning of the year.

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