Lee Chobo (a pseudonym), a 40-year-old owner of a meat distribution business in Hapjeong-dong, Seoul, has a lot on his mind these days. His business is running steadily, but a stock he invested in a year and seven months ago keeps giving him red flags. “I don’t know much about stocks, but I know companies, so I invested about 7 million won as if I were studying stocks, and here we are,” he said. The stock he bought was Kakao. He started buying in October 2021, and after a small amount of “watering down” (buying low to lower the initial unit price), he now has 58 shares in his stock account, which he bought for 123,891 won.
Chobo Lee’s (pseudonym) 26-day stock account balance for his investment in Kakao. Reader provided
Kakao’s closing price on the 26th was KRW 56,600. His current return is -54.31%, a loss of 3.29 million won. Why did he buy Kakao stock? “I bought it because I think investing in a company that provides convenience in real life will be good in the medium to long term,” Lee said. “Everyone uses KakaoTalk,” he said, adding, “I will continue to hold it until it becomes profitable.”
Hanwha Investment & Securities “Profit rebound is expected in the second half of the year”
As expected from a company that operates the nation’s messenger, there were 21 reports on Kakao this month alone.
“Kakao posted KRW 1.74 trillion in revenue and KRW 71.1 billion in operating profit in the first quarter of this year, significantly missing market estimates,” said Hanwha Investment & Securities. Kim So-hye, a researcher at Hanwha Investment & Securities, explained the reasons for the poor performance, saying, “Overall sales declined due to slowing demand from all industries, and marketing and new business investments were larger than expected.” “Commerce revenue increased 25% year-on-year due to the expansion of gift delivery products, but the advertising segment only grew 1%,” Kim said. On a positive note, mobility revenue grew 38% due to platform enhancements and parking business expansion. “We forecast 2Q operating profit of KRW152.5 billion (down 10.8% year-on-year), and expect a rebound in profit in the second half of the year,” Kim added. For the full year, the company expects revenue of 8.69 trillion won and operating profit of 631 billion won.
Kakao’s Pangyo office. Courtesy of Kakao
“We expect Kakao to reorganize KakaoTalk and expand its generative AI (artificial intelligence) services in the second half of the year,” said Mirae Asset Securities. “We expect Kakao to reorganize the unsuccessful KakaoTalk third tab into an open chat tab, add bizboard (banner) ads, and earn revenue from paid open chat room fees,” said Lim Hee-seok, a researcher at Mirae Asset Securities. “Revenue from the new open chat tab is expected to be 2-2.5 times higher than the previous one, and the AI assistant ‘Jordi’ service is expected to be launched within the year,” Lim said. “Although the stock price has been weak recently, the increase in time spent on KakaoTalk since the beginning of the year is positive,” Lim added.
“Expanding investments and losses in major affiliates such as Kakao Healthcare and Kakao Brain, which are part of the new business, will have to be borne in the short term,” said Seo Jung-yeon, a researcher at Shin Young Securities. “We are lowering our earnings estimate to reflect the slowdown in growth of high-margin businesses and cost burden from expanding investment in new businesses,” Seo said. The price target was cut 9.4% to 77,000 won from 85,000 won스포츠토토. The average price target of 20 brokerages as of Feb. 26 is 76,950 won.
Kakao will introduce Open Chat as a separate tab on the third tab of KakaoTalk, reinforcing its role as an interest-based communication platform. Courtesy of Kakao
Company “to launch digital healthcare platform in Q4″…also burning treasury shares
On the 27th, a Kakao representative said, “We plan to further segment communication, which is the essence of KakaoTalk, and provide services that fit the user’s purpose and context, and to this end, we are reorganizing KakaoTalk’s main tabs and upgrading various functions.” “We will continue to invest in infrastructure for stable and continuous delivery of services, and expand our investment in AI and healthcare, which are future growth engines, while promoting operational cost efficiency.”
Monthly graph of Kakao’s stock price.
When asked what the new growth engines are, he said, “The community AI business led by Kakao Brain and Kakao Healthcare.” “Our advantage is that we have a high level of understanding of AI technology through our experience in building our own foundation model,” he said. “We will quickly launch vertical services (targeting customers with specific product interests) utilizing internal and external AI technology.”
Kakao’s Jeju office. Courtesy of Kakao
Kakao Healthcare aims to quickly achieve results in both B2B (business-to-business) and B2C (business-to-consumer) areas. In B2B, the company plans to introduce products that standardize and digitize clinical data and medical records held by medical institutions so that researchers and healthcare companies can use the data. In B2C, AI will analyze data and lifelogs (personal vital signs, exercise, diet, and other lifestyle data) linked to continuous glucose monitors for people with diabetes or those who need to manage their blood sugar. The company plans to launch a mobile-based personalized digital healthcare platform in the fourth quarter that provides life guides such as diet and exercise suggestions.
When asked about its commitment to shareholders, the company said, “In line with the mid- to long-term shareholder return policy announced last year, we are utilizing 15% to 30% of our free cash flow (FCF) on a standalone basis for three years to fund shareholder returns.” The company burned 306.2 billion won in treasury shares last year and 1224 billion won this year. The company plans to burn more next year.