DB Securities and Hanwha Investment Securities lowered their target prices for Kakao stocks to 57,000 won and 62,000 won respectively while maintaining 'buy' ratings, as the company's stock price fell to the 30,000 won range. The target price reductions occurred despite analysts forecasting Q2 earnings that would meet market consensus, with DB Securities estimating revenue of 2.0126 trillion won and operating profit of 218.4 billion won. Analysts attributed the stock decline to uncertainty surrounding Kakao's AI business monetization model, even as core business segments showed stable growth trajectories.
Securities Firms Lower Kakao Target Prices Despite Buy Ratings
DB Securities and Hanwha Investment Securities both maintained 'buy' investment opinions for Kakao while adjusting target prices downward to 57,000 won and 62,000 won respectively. Shin Eun-jung, a researcher at DB Securities, stated that "earnings are stable, but the stock price has declined excessively due to the absence of an AI revenue model in the future," explaining the background for the target price adjustment.
Analysts Forecast Q2 Earnings Meeting Market Consensus
DB Securities estimated Kakao's Q2 revenue at 2.0126 trillion won, a 0.8% decrease year-over-year, with operating profit of 218.4 billion won, up 17.4%. Hanwha Investment Securities projected revenue of 2.066 trillion won and operating profit of 223.7 billion won, forecasting results that would align with consensus expectations. Both firms characterized the Q2 earnings outlook as meeting market expectations.
Ad and Commerce Segments Show Growth in Analyst Projections
DB Securities diagnosed that the advertising sector is sustaining growth of over 20% centered on business messages, with display advertising (DA) continuing its growth trajectory due to expanded feed exposure effects. The commerce sector is expected to grow approximately 8% centered on gift-giving, aided by Family Month promotion effects. In the content sector, the music business is expected to show favorable trends centered on SM Entertainment, though the story and media business is analyzed to be relatively sluggish. Cost burdens are expected to be limited, with Piccoma's Japan Golden Week marketing costs increasing somewhat, but personnel and infrastructure costs are projected to maintain stable levels.
AI Business Uncertainty Identified as Key Stock Pressure
Shin Eun-jung of DB Securities stated that "ChatGPT for Kakao is estimated to have approximately 11 million cumulative users, but traffic indicators and external partner connections have not yet materialized in earnest," adding that "in the short term, it is absolutely necessary to find an AI breakthrough through Kanana In Talk." Kim So-hye, a researcher at Hanwha Investment Securities, said "the buzz and user expansion speed of already-launched AI services are somewhat slower than market expectations, but the company appears to be focusing on securing user retention and experience completeness rather than short-term traffic," adding that "service integration and global partnership onboarding to expand the user base are scheduled soon."
Kakao Stocks Close at 35,400 Won, Down 80% From 2021 Peak
According to the Korea Exchange, Kakao closed at 35,400 won, down 200 won (0.56%) from the previous trading day. Compared to the intraday high of 173,000 won recorded on June 24, 2021, this represents approximately an 80% decline, meaning the stock price has been cut to one-fifth over five years.
FAQ
Why did analysts lower Kakao's target prices despite maintaining buy ratings?
Analysts lowered target prices to 57,000 won (DB Securities) and 62,000 won (Hanwha Investment Securities) due to uncertainty surrounding Kakao's AI business monetization model. Shin Eun-jung of DB Securities explained that "earnings are stable, but the stock price has declined excessively due to the absence of an AI revenue model in the future."
What are analysts' expectations for Kakao's Q2 earnings?
DB Securities estimated Q2 revenue at 2.0126 trillion won (down 0.8% year-over-year) and operating profit at 218.4 billion won (up 17.4%). Hanwha Investment Securities projected revenue of 2.066 trillion won and operating profit of 223.7 billion won, both forecasting results that would meet market consensus.
How many users does ChatGPT for Kakao have?
According to DB Securities researcher Shin Eun-jung, ChatGPT for Kakao is estimated to have approximately 11 million cumulative users, though traffic indicators and external partner connections have not yet materialized in earnest.
