"Naver's Core Growth Slows, New Businesses Require Patience"[Click e-Stock]

There is growing assessment that Naver's core businesses, such as advertising and commerce, are showing slower growth. While expectations remain high for new businesses following the consolidation of Dunamu, analysts believe more time will be needed.

On February 9, Daishin Securities maintained its target price for Naver at 330,000 won and its "Buy" investment rating, citing these factors. The previous trading day's closing price was 249,000 won.

In the fourth quarter of last year, Naver posted revenue of 3.1951 trillion won and operating profit of 610.6 billion won. These figures were up 10.7% and 12.7%, respectively, from the same period a year earlier. However, compared with the market consensus, revenue came in slightly below expectations, while operating profit was in line.

For the Search Platform division, revenue came to 1.0596 trillion won, down 0.5% year-on-year. Integrated advertising revenue grew 6.7%, a slowdown from 10.5% in the previous quarter. This was attributed to a higher base for commerce advertising, which has been driving integrated ad growth, starting in the fourth quarter of 2024. Looking ahead, integrated advertising revenue is expected to continue to decelerate.

Commerce revenue was solid. It rose 36.0% year-on-year to 1.0539 trillion won. The increase in commission rates is seen as having played a key role. This effect is expected to continue through the first quarter of this year. However, given that the commission hike began to be reflected from June of last year, analysts say it will be inevitable for commerce revenue growth to gradually slow thereafter.

Meanwhile, global C2C (consumer-to-consumer) platform Poshmark recorded double-digit growth in both revenue and transaction volume. Although hiring for commerce-related roles, higher marketing expenses, and expanded GPU investments are continuing, overall operating expenses increased by 10.3% year-on-year to 2.5845 trillion won, partly due to changes in the useful lives of certain assets. The operating margin was 19.1%, up 0.9 percentage point from the previous quarter.

In the medium to long term, financial services in Korea and C2C overseas are viewed as Naver's key growth pillars, but they are expected to take time to materialize. From this year, revenue currently classified into advertising, commerce, fintech, content, and enterprise will be reorganized into Naver Platform, Financial, and Global Challenge (C2C, content, enterprise). In particular, analysts say attention should be paid to the fact that revenue from the C2C business, which Naver plans to strategically nurture as a core business going forward, will be newly disclosed. Lee Jieun, an analyst at Daishin Securities, said, "Naver is moving away from a business structure centered on the domestic advertising and commerce markets, where growth has been limited, and is seeking to expand its business in global markets."

Naver is expected to focus on expanding its financial business in the domestic market, leveraging the consolidation of Dunamu as a catalyst, while concentrating on expanding businesses such as C2C and content in overseas markets. For the C2C business, whose revenue will be disclosed separately, if meaningful profit contribution is confirmed, its standalone business value could be highlighted. Analysts also say that once earnings from new businesses such as Financial become visible, a re-rating of the company's valuation will be possible.

Lee added, "However, before these changes can be confirmed in the numbers, the Financial segment will need to see the establishment of a regulatory framework for digital assets and the completion of the Dunamu consolidation, while the C2C business will need to demonstrate structural growth. In the short term, the slowdown in core business growth is likely to stand out first, and it will take time for expectations for new businesses to be fully reflected in the share price."

Yonhap News Agency

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