[Click eStock] "Kakao, Weak 1Q Earnings... Target Price Down"

Kiwoom Securities announced on the 8th that it is lowering the target price for Kakao from 82,000 KRW to 78,000 KRW. The investment rating remains 'Buy.'

Kakao recorded sales of 174 billion KRW and an operating profit of 7.1 billion KRW in the first quarter. These figures fell significantly short of market estimates due to sluggish advertising business and increased investment costs focused on AI and infrastructure. However, the advertising business downturn is considered a short-term factor linked to economic uncertainty, and growth is expected to resume in the second quarter. Additional new advertising revenue through messenger service restructuring, such as the introduction of the Open Chat tab, is expected to be secured in earnest from the second half of the year.

Jingu Kim, a researcher at Kiwoom Securities, said, "In the short term, there may be profit pressure due to advertising business variables and infrastructure-focused investments until the second quarter, which could lead to valuation burdens from a short-term earnings perspective. However, with the strengthening of AI services and their opening in the second half, the intrinsic value of AI is expected to be highlighted. Considering the increase in value based on artists in the vertical sector, the linkage with metaverse services, and the growth of Piccoma, the value of Kakao Entertainment is presented as a key point."

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