[Click eStock] Naver Faces 2.3 Trillion Won Betting Overvaluation Controversy... Must Recover Growth to Lower 'Target Price'

[Asia Economy Reporter Lee Seon-ae] Korea Investment & Securities announced on the 5th that it maintains a buy rating on Naver (NAVER) but lowers the target stock price to 300,000 KRW. Regarding Naver's acquisition of Poshmark, the U.S. version of Danggeun Market, the previous day, concerns about the acquisition price were raised, emphasizing that growth recovery is essential to justify the acquisition.

Jung Ho-yoon, a researcher at Korea Investment & Securities, explained, "Poshmark is a U.S.-based secondhand trading platform similar to Korea's Danggeun Market, mainly used by the MZ generation in the U.S. for trading clothing and fashion items." He added, "The acquisition price was approximately $1.6 billion (about 2.3 trillion KRW), acquiring 100% equity at a per-share transaction price of $17.9 (total enterprise value of $1.2 billion), and the total acquisition amount was calculated by adding Poshmark's cash holdings of $440 million."

Poshmark is the largest fashion secondhand trading platform in the U.S. It has 80 million registered users, 8 million active buyers, and 4.5 million active sellers. As of 2021, its GMV was $1.82 billion (+27.5% YoY). Besides the U.S., it has users in Canada, Australia, the UK, and India, making Naver able to use Poshmark as a spearhead for entering overseas commerce markets.

Researcher Jung said, "The key after the merger is synergy creation," and forecasted, "Post-merger, they plan to significantly improve performance by increasing sales growth through new business ventures such as advertising and introducing Naver commerce technology, while efficiently managing costs."

However, Jung emphasized that long-term growth recovery is essential to justify the acquisition. He stated, "Poshmark's revenue growth rate in Q1 this year was in the low double digits, declining from 27.6% in 2020 and 24.6% in 2021, and the deficit also expanded compared to 2021." He evaluated, "Naver's acquisition price of $1.2 billion corresponds to a price-to-sales ratio (PSR) valuation of about 3.2 times based on 2022 earnings estimates. Considering the average valuation of similar companies is 3.7 times, the acquisition price is not unreasonable, but if growth does not recover, controversy over price appropriateness may arise."

To this end, Jung added that an increase in per capita purchase amount is necessary. He explained, "Poshmark's revenue is generated by charging a 20% commission on transaction amounts, so transaction growth is important," and noted, "Naver's future task is to increase per capita purchase amount through algorithm enhancement and efficient product exposure, which will be a prerequisite for Poshmark's commerce growth rate to rebound."

Meanwhile, Jung assessed that the approximately 8% stock price drop of Naver the previous day was excessive. He said, "The burden of costs such as labor expenses is gradually decreasing, and if the sales growth rate rebounds, it will create a favorable situation leading to profit growth," but added, "However, reflecting the valuation decline due to the global peer stock price drop, the target stock price is lowered to 300,000 KRW."

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