Despite improved earnings, Naver and Kakao, Korea's leading platform corporations, have failed to stage a rebound in their share prices. Some noted that, apart from the corporations' ability to generate revenue, they have not won investors' confidence in their future growth.
According to the Korea Exchange (KRX) on the 5th, while the KOSPI index has risen 65% so far this year, Naver and Kakao have fallen 14% and 22%, respectively, becoming out-of-favor stocks. Naver is down 53.8% from its record high of 452,000 won in July 2021, and Kakao has plunged 72.1% from its peak of 169,000 won in the same year, cutting its share price to a quarter.
Earnings, on the other hand, are improving. On a consolidation basis in the first quarter of this year, Naver posted revenue of 3.2411 trillion won and operating profit of 541.8 billion won. Revenue rose 16.3% from a year earlier, and operating profit increased 7.2%. Revenue was an all-time high, and it was also the first time it surpassed 3 trillion won on a first-quarter basis.
The company signaled shareholder returns by saying it would proceed with a treasury share cancellation concurrently with the earnings release. Kim Hee-cheul, Naver chief financial officer (CFO), said, "We are reviewing a treasury share cancellation," adding, "We will provide details through a future disclosure." However, despite the announcement, it has not led to a share price rebound.
Concerns about slowing profitability remain. The first-quarter operating margin was 16.7%, the lowest in the past three years. With expanded promotions and increased investment in artificial intelligence (AI) infrastructure, the pace of profit improvement has slowed. In addition, the timing of returns on AI investment is uncertain, and uncertainties have grown for new businesses such as Blockchain due to regulations and delayed systems, which is also seen as a burden.
Jeong Ho-yoon, an analyst at Korea Investment & Securities Co., said, "Along with the launch of the AI tab and shopping agent, gradual monetization was emphasized, but amid limits to growth in the domestic market for advertising and e-commerce, there are constraints on boosting growth with technology alone," adding, "For the time being, investment appeal will not be high."
Kakao, which is set to announce earnings on the 7th, is also expected to show improved results. According to financial information provider FnGuide, Kakao's first-quarter revenue consensus (average market forecast) is 2.0091 trillion won, projected to grow 8% from a year earlier. Operating profit is estimated at 175.3 billion won, up 66% over the same period.
In Kakao's case, it is expanding AI services based on KakaoTalk and pursuing an "AI super app" strategy, but as user perception and service completeness fall short of expectations, its monetization model remains unclear. In addition, the prolonged management vacuum caused by past legal risk has weakened momentum for new businesses, weighing on investor sentiment.
Oh Dong-hwan, an analyst at Samsung Securities, said, "Although 'ChatGPT for Kakao' and 'Kanana in KakaoTalk' were launched, traffic growth has been limited," adding, "AI agents are currently Kakao's core growth strategy, but it will take time before they translate into actual revenue."