Reeling from Interest Rate Hikes... Naver and Kakao Lose 40 Trillion Won in Market Cap This Year

Naver Loses 25 Trillion Won, Kakao 20 Trillion Won
Stock Prices Fall 30% and 34% in 6 Months

[Asia Economy Reporter Kwon Jae-hee] Naver and Kakao, which once competed for the 3rd and 4th spots in KOSPI market capitalization, have seen their market caps evaporate by more than 40 trillion won this year due to the global interest rate hike impact. Moreover, with a bleak earnings outlook for the second half of the year, it is difficult to find any momentum for a stock price rebound.

According to the Korea Exchange as of 9:15 AM on the 15th, Naver's (NAVER) stock price stood at 228,500 won, down 0.65% from the previous trading day. This represents a roughly 40% decline compared to the peak of 381,000 won on January 3, the first trading day of this year. The day before, Naver hit a new 52-week low of 226,000 won during intraday trading. At the same time, Kakao's stock price remained unchanged from the previous day's closing price at 68,100 won. Kakao also fell about 42% from its peak of 117,000 won on January 3 this year.

Naver and Kakao have fallen more sharply than the KOSPI over the past six months. While the KOSPI dropped 8.01% during this period, Naver and Kakao declined by 29.92% and 33.88%, respectively.

As the stock prices continued to slump, their market capitalizations were halved. Naver and Kakao, representative growth stocks in Korea, were once ranked 3rd and 4th in KOSPI market capitalization as 'untact' (contactless) leaders during the COVID-19 pandemic, but their market caps have been cut in half this year due to the rapid interest rate hikes. Naver’s market cap has shrunk by about 25 trillion won, and Kakao’s by about 20 trillion won since the beginning of this year. Their declines have been steeper than the average KOSPI drop over the past six months. Growth stocks tend to price in future earnings by applying a higher discount rate, so they are inevitably hit hard when interest rates rise.

The outlook for the second half of the year is also not bright, making it difficult to find momentum for a stock price rebound. According to financial information provider FnGuide, Kakao’s estimated operating profit for the third quarter was initially 232 billion won but has been revised down by 14.13% to 199.2 billion won. Naver’s third-quarter operating profit estimate was originally 398.9 billion won but has also been reduced by about 10.75% to 356 billion won.

Accordingly, the securities industry is lowering its expectations for Naver and Kakao. According to FnGuide, the target price for Kakao suggested by securities firms is 108,900 won, a significant drop from 137,056 won six months ago. Naver’s target price has also fallen sharply to 362,500 won from 483,684 won six months ago.

Seong Jong-hwa, a researcher at Ebest Investment & Securities, diagnosed, "Throughout this year, growth stocks have continuously been affected by the macro environment of shrinking valuation premiums due to interest rate hikes, and fundamentals are also weak."

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