Hana Securities said Kakao(035720) posted second-quarter results that beat market expectations, but it will take time for full-fledged monetization of the artificial intelligence (AI) agent business. It maintained a "buy" rating but cut the target price to 58,000 won from 75,000 won. Kakao's previous session closing price was 38,300 won.
Lee Jun-ho, an analyst at Hana Securities, said in a report on the 7th, "In the end, the timing of monetization will be determined by the pace of securing traffic," and "through 2027, it will be a period to increase agent service touchpoints and secure traffic."
Kakao's second-quarter consolidated revenue was 2.0985 trillion won, up 9.4% from a year earlier. Operating profit was 277 billion won, up 35.9%, beating market forecasts. The operating margin was 13.2%.
Stable growth in Talk Biz ads and improved profitability at subsidiaries, including Kakao Pay, drove the results. Talk Biz revenue was 643.2 billion won, up 12.3% from a year earlier. Of that, advertising revenue rose 14%, while business messages and display ads (DA) grew 20% and 28%, respectively.
Other platform revenue also rose 21.7% to 587 billion won. Kakao Pay revenue increased 41%, leading the growth.
Hana Securities positively assessed Kakao's announcement of a partnership with Coupang Eats and its decision to focus companywide capabilities on B2C AI agents. However, it noted that since users can already select products and complete payment on smartphones with just a few taps, the company needs to deliver a user experience that goes beyond existing services.
The analyst explained, "To draw users into the agent ecosystem, the path to use must be shortened through more advanced reasoning, accompanied by price competitiveness versus existing products and services," adding, "Time to train data and marketing expenses to attract users are also necessary."
Kakao set a goal of generating more than 10% of Talk Biz revenue from new AI businesses in 2028. That means it aims to post more than 260 billion won in revenue through AI commerce fees and subscriptions and AI search. It targets 10 million monthly active users (MAU) for AI agents by year-end.
However, Hana Securities said the latest guidance alone is unlikely to meet the market's expectations for AI monetization. It said a rapid expansion of aggressive partnerships and swift user acquisition are needed for a rise in corporate value led by the core business.
The target price cut reflected the recent share-price trend of listed subsidiaries and the sluggish performance at Kakao Entertainment. Hana Securities forecast Kakao's revenue this year at 8.3546 trillion won on a consolidated basis and operating profit at 999.6 billion won. Those would be up 8.9% and 29.6%, respectively, from a year earlier.