[Click e-Stock] "Concerns Remain, But This Stock Is Worth Investing In After the Share Price Drop"

Shinhan Investment Corp. announced on April 14 that it has lowered its target price for NAVER to 240,000 won, but raised its investment rating to "Buy."

Kang Seokoh, Senior Research Analyst at Shinhan Investment Corp., explained, "We upgraded our investment rating due to increased upside potential following the share price decline." However, he also noted, "Rising costs from strengthening commerce delivery and promotions, as well as uncertainty about recouping investments in artificial intelligence (AI), continue to be a burden, making it difficult to raise the price-to-earnings ratio (PER)."

The company is expected to post an operating profit of 540.6 billion won in the first quarter this year, in line with the market consensus of 564.7 billion won. Kang estimated, "There appears to have been some indirect benefit following the Coupang incident, and the ongoing Plus Store promotions are driving growth in transaction volume." However, he also pointed out, "The continued high promotional spending means it will take time before profitability improves."

He added, "Although a focus on commerce should allow transaction volume and sales growth rates to meet market expectations, large-scale promotions will still be necessary, and costs to enhance offerings such as free shipping will make it difficult to defend this year’s operating profit margin."

AI investment is also cited as a factor depressing profitability. Kang stated, "Last year, investment in graphic processing units (GPUs) reached 700 billion won, but this figure is expected to exceed 1 trillion won this year." He continued, "Despite this large-scale investment, the timeline for returns remains uncertain, which will continue to be a concern."

He concluded, "With expectations for AI and other drivers having faded and the probability of a strong earnings surprise low, the share price has fallen. NAVER will need to demonstrate significant growth in scale—surpassing that of its commerce and AI investments—for a meaningful rebound to take place."

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