[Click eStock] "Kakao, 3Q Earnings and Stock Price Decline Threshold... Target Price Down"

[Asia Economy Reporter Kwon Jae-hee] NH Investment & Securities maintained its 'Buy' rating on Kakao but lowered the target price from 110,000 KRW to 78,000 KRW.

Kakao's Q3 earnings are expected to be 1.83 trillion KRW in revenue and 159.7 billion KRW in operating profit. Revenue is projected to increase by 5.1% year-over-year, while operating profit is expected to decline by 5%. The operating profit falls short of the previous estimate of 198.4 billion KRW and the market consensus of 192.8 billion KRW. Due to the economic slowdown, growth rates in advertising and commerce businesses have not fully recovered, and costs related to outsourced infrastructure and amortization from the expansion of the mobility business are also expected to rise.

NH Investment & Securities judged that although the unfavorable environment for growth stocks continues, there is no fundamental problem with Kakao's competitiveness. Despite increased offline activities, commerce, which underperformed in Q2, is gradually showing signs of recovery. It is expected to show a more pronounced turnaround during the peak season in Q4. Advertising revenue is anticipated to expand through various new sources such as open chat ads, profile area customization, and emoticon subscription services. Content revenue will reflect the success of Suriname and Hunt, as well as new content sales from Q4 onward. Kakao Mobility is expected to see business expansion and earnings growth due to taxi fare increases and the acquisition of GS Park24.

An Jae-min, a researcher at NH Investment & Securities, analyzed, "Recently, concerns over poor performance in advertising and commerce industries due to the economic slowdown, valuation declines of growth stocks following the stock market downturn, and drops in subsidiary stock prices have collectively led to weak stock performance. However, considering the earnings recovery in 2023, the Q3 earnings season is expected to be the bottom line for the decline in stock price and earnings."

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