[Alpha Biz= Paul Lee] Daishin Securities maintained its "Buy" rating on Kakao with a target price of 48,000 KRW on Thursday, citing that while the company's AI-powered KakaoTalk revamp plan is promising, short-term earnings improvement will be challenging. Kakao’s stock closed at 40,200 KRW in the previous session.
In the fourth quarter of last year, Kakao posted revenue of 1.9591 trillion KRW and an operating profit of 106.7 billion KRW. Revenue met market expectations, but operating profit fell short due to a one-time expense of 31.5 billion KRW related to the TMON acquisition.
The company’s "Talk Biz" segment recorded revenue of 567.2 billion KRW, with ad revenue at 321 billion KRW and commerce revenue also showing recovery due to the peak season. However, Daishin Securities warned that sluggish market conditions and the traditionally weak first-quarter advertising season could slow Talk Biz growth.
Daishin Securities noted, "Kakao’s content business continues to decline, with weak gaming performance being the primary factor. Given that new game releases will not impact earnings until year-end, a near-term recovery appears unlikely."
The firm added, "Overall content revenue is expected to remain weak, with a decline in annual sales forecasted. While cost control efforts continued, a one-time loss of 31.5 billion KRW related to TMON and WeMakePrice was reflected in Q4 depreciation expenses."
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
