[Click e-Stock] "Time to Be Cautious... Kakao Target Price Cut by 11%"

Korea Investment & Securities lowered its target price for Kakao by 11% to KRW 53,000, while maintaining its Buy rating.

According to Korea Investment & Securities' company analysis report on Kakao, titled "3Q26 Preview: Time to Be Cautious," released on October 21, third-quarter revenue and operating profit are estimated to reach KRW 2.04 trillion and KRW 224.6 billion, respectively, falling short of the market consensus of KRW 252.2 billion in operating profit.

“Chuseok had a negative impact on both advertising and commerce in Talk Biz,” said Jeong Ho-yoon, an analyst at Korea Investment & Securities. “Kakao Pay, which has driven growth, is also expected to post somewhat weaker results as trading volume in the stock market has declined.” Content revenue is also expected to remain weak in the third quarter.

At the IF Kakao event held on October 13, the company shared its vision for artificial intelligence (AI). “There are two key considerations: performance good enough for users to feel tangible benefits, and a charging model that can generate revenue,” Jeong said. He added, “AI services consume GPU computing power, so if user usage grows over the long term but the pricing structure is not sufficient to cover the cost, that could pose a risk to the sustainability of the service and the quality of its offerings.”

Accordingly, Jeong maintained his Buy rating but lowered the valuations applied to major business divisions, cutting the target price from KRW 60,000 to KRW 53,000. This marks the third consecutive target-price cut, following reductions from KRW 75,000 in July 2025 to KRW 70,000 in April 2026 and KRW 60,000 in July 2026. Kakao shares closed at KRW 31,350 the previous day, October 20.

Jeong also said that investment decisions after the planned personnel split into Kakao AI and Kakao X in January 2027 will be important. “Kakao AI, which has relatively less valuation pressure and offers the potential to deliver AI results, will be more attractive to investors than Kakao X,” he said, adding, “The priority, however, is to clearly present a monetization strategy using AI.”

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