[Click eStock] "Kakao Needs AI Results in H2 for Rebound... Target Price Cut"

"Buy" Rating Maintained
Second-Quarter Operating Profit Expected to Meet Estimates

Securities analysts have noted that for Kakao's stock price to rebound, concrete results from its artificial intelligence (AI) services in the second half of the year must be confirmed.

According to Hanwha Investment & Securities on July 8, analyst Kim So-hye stated, "Quarterly earnings are expected to rise due to advertising growth, but a stock price revaluation will require visible achievements from AI services." She lowered the target price from 70,000 won to 62,000 won but maintained a "Buy" rating.

Kakao Pangyo Ajit, Seongnam-si, Gyeonggi-do Photo by Yonhap News

The company is expected to meet market expectations for its second-quarter performance this year. Estimated sales are 2.0066 trillion won, with an operating profit of 223.7 billion won. The main business divisions reportedly performed better than the previous quarter, benefiting from seasonal peak demand.

The key factor is the performance of AI services in the second half. Analyst Kim commented, "Although the buzz surrounding already-launched services and user expansion is somewhat slower than the market anticipated, Kakao is prioritizing user retention and complete user experience over short-term traffic. Soon, Kakao is set to introduce service integrations and roll out offerings based on global partnerships to further expand its user base."

The advertising business within the platform segment is projected to maintain growth even in the second half, when base effects become more challenging. Kim explained, "Growth is not simply due to increased inventory, but rather from the diversification of advertising products and advertisers. This structural improvement enhances Kakao's competitiveness in its advertising platform."

The downward adjustment of the target price reflects a slight decrease in the target multiple, in response to lower valuation multiples among global industry peers. Kim pointed out, "Kakao's share price has continued to underperform relative to market returns. Given the current lower price level, the factors driving a price increase may outweigh concerns."

She added, "We expect quarterly earnings to continue rising thanks to advertising growth, and if Kakao can demonstrate even partial monetization of its AI agent, the stock price is likely to undergo a gradual revaluation."

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