Korea Investment & Securities Co. said on the 4th that even though Naver delivered better-than-expected first-quarter results, its investment appeal will not be high for the time being. It maintained a BUY rating and a target price of 330,000 won. Naver's closing price in the previous session was 211,000 won.
Jeong Ho-yoon of Korea Investment & Securities Co. said, "Naver emphasized gradual monetization with the launch of the artificial intelligence (AI) tab and shopping agent," but noted, "With growth in the domestic market for ads and e-commerce limited, there will be constraints on lifting this with technology alone, so investment appeal is unlikely to be high for the time being."
In the first quarter of this year, Naver posted revenue of 3.24 trillion won and operating profit of 541.8 billion won. Year over year, revenue rose 16.3% and operating profit increased 7.2%.
Ad revenue was 1.39 trillion won, up 9.3% year over year, marking growth similar to last year. Due to revenue reclassification, the existing search platform and commerce ads were combined, and in the first quarter of this year, high growth in commerce ads drove overall growth.
Service revenue continued strong growth, rising 35.6% year over year to 445.3 billion won. This was driven by the effect of higher fees and a rise in the Smart Store transaction amount growth rate (+14%).
Financial revenue grew 18.9% year over year to 459.7 billion won. In the first quarter, Naver Pay's transaction amount was 24.2 trillion won, up 23.4% from a year earlier. Both payment amounts on the Naver platform and off-platform continued strong growth.
However, operating expenses also increased 18.3% from a year earlier to 2.7 trillion won. With the impact of the acquisition of the European secondhand transaction platform "Wallapop" reflected, labor costs rose 13.2%, and infrastructure expense growth rate jumped 32.5% due to graphics processing units (GPUs) purchased in the fourth quarter of last year.
Jeong said, "In the short term, it will be important whether the upward trend in market share in the domestic e-commerce market continues," adding, "In the mid to long term, the market needs new investment points it can look forward to, such as a blueprint for creating new revenue models through AI or ways to use stablecoins."