[Click eStock] "Kakao Needs New Growth Drivers... Target Price Lowered"

On April 16, Samsung Securities lowered its target price for Kakao from KRW 73,000 to KRW 59,000, noting that although profitability is improving, new growth drivers are needed for a valuation rebound.

Donghwan Oh, a researcher at Samsung Securities, explained in a report released the same day, "We have reflected the decline in the valuation of peer companies and the decrease in revenue resulting from the sale of subsidiaries" as the background for the downward revision of the target price.

Kakao's operating profit for the first quarter is expected to be in line with market consensus, reaching KRW 171.1 billion, up 49% year-on-year, driven by platform growth and cost control.

Profitability is also expected to improve due to the sale of content businesses. Oh noted, "With the sale of stakes in Kakao Games and AXZ (formerly Daum), the operating losses of subsidiaries are expected to be excluded from consolidated results this year," adding, "The partial sale of unprofitable content businesses is positive for consolidated performance." However, he also pointed out that finding new growth drivers to replace the content segment remains a challenge.

Regarding artificial intelligence (AI), the assessment is that there is still a long way to go. Oh said, "Although ChatGPT for Kakao and Kanana in KakaoTalk have been launched, the increase in traffic from these services has been limited," adding, "Due to restrictions on KakaoTalk conversation data and the performance limitations of on-device AI, users have yet to experience significant benefits."

He continued, "While AI agents are currently at the core of Kakao's growth strategy, there is still a long way to go before they contribute to monetization. Therefore, we believe that presenting new growth drivers is necessary for a valuation rebound."

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