[Click eStock] "Kakao, Concerns Over AI Competitiveness Weakening... Target Price Down"

Target Price Downgraded from 69,000 Won to 56,000 Won

On the 10th, Kiwoom Securities downgraded the target price of Kakao from 69,000 KRW to 56,000 KRW, citing concerns that its artificial intelligence (AI) competitiveness may weaken. The investment rating was maintained as 'Buy.'

Jingu Kim, a researcher at Kiwoom Securities, explained, "Reflecting concerns about the weakening AI competitiveness encompassing the Talk Biz and vertical business divisions, we lowered the target price-to-earnings ratio (PER) for the headquarters and other business divisions from 22.5 times to 20 times. Additionally, considering the slowdown in gross merchandise volume (GMV) growth in the paid content business division and weakening competitiveness in Western markets, we reduced the values of Kakao Entertainment and Kakao Piccoma compared to previous estimates."

There has been no visible change in the AI strategy and detailed action plan that spans Talk Biz and major vertical business divisions even after management changes, and it is difficult to view the company as being proactive in producing and presenting tangible results to increase user added value. Researcher Kim pointed out, "Global big tech companies are expected to visibly expand the subscription economy in the medium term by learning from users’ voluntary data transfers and enhancing user added value based on inference and prediction through this process. If Kakao fails to swiftly lead strategic business partnerships with global big tech companies using user data from various segments it has secured as a weapon, the value of Kakao’s data will likely be diluted over time, and the probability of losing AI competitiveness will increase exponentially. Management needs to recognize this."

He expressed the opinion that Kakao needs to transform into a creative organization. Researcher Kim said, "While it is fully understandable that Kakao is currently focusing on organizational management to establish relationships with various stakeholders and improve internal systems, internet business fundamentally requires expanding user coverage based on creative and new services under a very flexible organizational management system. If Kakao continues to focus on enjoying performance centered on existing services under the current management-oriented approach, there could be pressure on valuation in the mid to long term." He added, "In the short term, performance improvement centered on commerce leveraging user traffic-based advertising and relational advantages is possible, but the aforementioned conditions must be met for a meaningful corporate value level-up."

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