[Click e-Stock] NAVER Faces Inevitable Margin Pressure Through Q3

On July 2, Hanwha Investment & Securities analyzed that despite NAVER's solid sales growth, the company's short-term margins will inevitably face pressure due to increased investments in infrastructure and marketing expenses. Accordingly, the brokerage maintained its "Buy" investment rating and a target price of 300,000 won.

Hanwha Investment & Securities estimated NAVER's consolidated sales for the second quarter at 3.39 trillion won, with operating profit at 544.7 billion won. While sales are expected to continue their year-on-year growth, operating profit is projected to fall short of market consensus by about 6%.

Sohye Kim, a researcher at Hanwha Investment & Securities, commented, "Advertising revenue likely grew by 9.6% year-on-year, driven by the expansion of the AI-based 'AdBoost' and strong performance in commerce ads. In addition, service revenue appears to have increased by 35.5%, supported by growth in Smart Store and Kurly transaction volumes."

However, cost pressures weighed on the results. Kim noted, "Partner expenses rose by 8% quarter-on-quarter due to World Cup broadcasting rights costs, while infrastructure and marketing expenses are estimated to have increased by 5% and 3.6%, respectively. While the overall sales growth trend remains intact, cost pressures from investments are expected to lower the operating margin for the second quarter to 16.1%."

This trend is expected to continue into the second half of the year. While there are positive factors such as strengthened delivery competitiveness and continued membership benefits, growth is expected to slow slightly as the impact of commission fee hikes dissipates. Additionally, the full-scale monetization of generative AI will require both time and financial investment, meaning that it will likely take at least two more quarters before tangible results are realized.

Kim stated, "It will be difficult to expect short-term performance momentum in the second half, so the stock price is likely to remain range-bound for the time being. However, the company's integrated service assets, which connect search to purchase and reservation, represent a strong competitive edge. As new businesses such as AIDC, cloud, and digital assets are sequentially released, we expect stock price momentum to build going forward."

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