[Click eStock] "Kakao Needs a Breakthrough with New Vertical Services"

by Kwon Hyeonji

Published 22 Jan.2025 08:24(KST)

Kakao's Growth Slows in Key Business Areas
Kiwoom Securities Lowers Target Price, Citing Need for New Vertical Services

Kakao is being evaluated as needing to enter highly competitive new vertical services to increase its corporate value and financial performance. This is because growth is slowing down recently in areas such as advertising and commerce, creating a need for a breakthrough.

On the 21st, Kiwoom Securities downgraded Kakao's target stock price from 47,000 KRW to 45,000 KRW, analyzing it as such. The investment opinion was maintained as 'Buy.'

Jingu Kim, a researcher at Kiwoom Securities, stated, "Kakao has secured growth over several years through multiple segment-specific businesses, but now the growth in key cash cow business areas such as advertising and commerce is declining."

Kakao's Q4 performance last year is expected to be limited. Sales and operating profit are forecasted at 1.9705 trillion KRW and 128.3 billion KRW, respectively, with an operating profit margin of 6.5%. Researcher Kim predicted, "TokBiz (KakaoTalk business division) sales increased by 10.3% compared to the previous quarter, driving platform segment sales growth, but content segment sales are expected to decrease by 3.1% compared to the previous quarter."

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He added, "By entering new vertical services, Kakao should visualize the creation of comprehensive business opportunities, including advertising and subscription economy, through strengthening user traffic and engagement. In the case of Kakao's webtoon platform 'Piccoma,' there is a challenge to recover profit margins due to intensified competition in the Japanese market recently, and continuous growth in the top line is also necessary." He further analyzed, "Global big tech companies are attempting to prepare inference and prediction-based large language models (LLM) and services targeting Artificial General Intelligence (AGI), and the related subscription economy may expand. This situation could weaken Kakao's competitive position in the artificial intelligence (AI) business."