After Naver and Kakao posted record-high revenue and operating profit in the third quarter this year, securities firms have been steadily raising their target prices for the two companies.
On the 5th of this month, Naver said third-quarter revenue on a consolidation basis was 3.1381 trillion won and operating profit was 570.6 billion won, up 15.6% and 8.6%, respectively, from a year earlier. It opened the era of 3 trillion won in revenue. Kakao on the 7th of the same month announced that it achieved third-quarter revenue of 2.0866 trillion won and operating profit of 208.0 billion won on a consolidation basis, up 8.6% and 59.4%, respectively, from the same period last year.
After the earnings announcement, seven securities firms raised their target prices for Naver. Mirae Asset Securities lifted Naver's target price from 340,000 won to 400,000 won. SK Securities and Daol Securities raised theirs to 360,000 won; Hana Securities and Kyobo Securities to 350,000 won; and Hyundai Motor Securities and EUGENE INVESTMENT & SECURITIES to 340,000 won.
In the third quarter this year, Naver applied artificial intelligence (AI) to search, shopping, and other areas and delivered results. In particular, as AI personalization recommendations were strengthened, commerce encompassing Naver Shopping also saw third-quarter revenue rise to 985.5 billion won, up 35.9% from a year earlier.
Lee Jun-ho, a researcher at Hana Securities, said of Naver, "It is proving the growth potential of advertising and commerce with 'on-service AI' that combines existing services with AI," adding, "With orders for government AI projects (GPU rental and independent foundation model build-out), a memorandum of understanding (MOU) with Nvidia, and securing 60,000 GPUs, its AI competitiveness has been established," and "We expect the greatest benefit during the AI transition across B2C (business-to-consumer transactions), B2B (business-to-business transactions), and B2G (business-to-government transactions)." Lim Hee-seok, a researcher at Mirae Asset Securities, said, "A strong uptrend is observed in e-commerce advertising performance thanks to the 'Ad Boost' advertising solution that uses AI," adding, "Ad prices are expected to rise."
For Kakao, four securities firms raised their target prices after the earnings announcement. Hanwha Investment & Securities raised it the highest to 85,000 won. DB Securities set it at 83,000 won, Mirae Asset Securities at 82,000 won, and Hana Securities at 75,000 won.
In Kakao's case, its AI results have not yet been proven, but the third quarter this year showed growth in subsidiaries, advertising, and commerce. Although user complaints continued after the sweeping overhaul of KakaoTalk, the company explained in its earnings announcement that users' time spent on the app increased from 24 minutes to 26 minutes after the revamp. Working with OpenAI, "ChatGPT for Kakao," embedded in KakaoTalk, also surpassed 2 million users on the 10th day after launch.
Lee Jun-ho, a researcher at Hana Securities, said, "In Korea, the platforms that can internalize AI agents are limited." Lim Hee-seok, a researcher at Mirae Asset Securities, said, "It is positive that the company demonstrated confidence in increasing KakaoTalk traffic through a sweeping app overhaul," adding, "To sustain profit growth, it is necessary to keep monitoring traffic."
While Naver and Kakao shares are up from the start of the year, they have been stuck in a trading range since June. As of Nov. 11 a year ago, Naver's share price was only 176,000 won. After attracting attention in June as AI beneficiaries, shares rebounded intraday to 295,000 won, but have since repeatedly fluctuated within a range. As of Nov. 11 a year ago, Kakao's share price was only 33,700 won. On June 24 this month, it rose to 70,400 won, but has since been stuck in a range.
Going forward, the task for both companies appears to be how well they can integrate AI into their own businesses. While both share the goal of advancing as AI agent corporations, they are likely to craft different strategies in how they do it. Naver is expected to invest about 1 trillion won this year in total infrastructure including GPUs (graphics processing units), and, considering expansion into new businesses such as physical AI after 2026, it projected investing more than 1 trillion won in GPUs alone. Kakao, however, said it will proceed with future AI investment in an efficient, capex-light manner.