Naver, Kakao sees decline in market cap amid mixed Q2 earnings prospect

[Courtesy of Naver and Kakao]

South Korea’s platform giants Naver Corp. and Kakao Corp. saw their market capitalization retreat on weak stocks this year.

According to the Korea Exchange on Monday, the combined market cap of Kakao Group stocks was 43.9 trillion won ($34.3 billion) as of Monday, down 5.15 percent from 46.2 trillion won earlier this year.

Kakao was the only company to see a decline in market cap among the country’s top 10 business groups. The fall came from sluggish stock prices of its major units such as Kakao Pay Corp. and Kakao Games Corp.

The ascent of POSCO Group to the fifth-largest market cap, as part of the country’s recent rally for secondary battery stocks, forced Kakao to fall into the 6th place on the top market cap list. POSCO Group saw its market cap more than double from 41.9 trillion won earlier this year to 112 trillion won.

Naver has also been surpassed by HD Hyundai Group in terms of market cap, with the online platform dropping from 8th to 9th despite an increase of 17.6 percent in market cap to 34.6 trillion won.

Samsung marked the most substantial growth in market cap this year to 622.8 trillion won from 518 trillion won at the beginning of this year. SK Group saw an increase of 36.34 percent to 168.8 trillion won and Hyundai Motor Group 23.59 percent to 123.3 trillion won. SK and Hyundai Motor Group joined Samsung, LG, and SK in reaching a market cap of more than 100 trillion won.

Local brokerage firms, in the meantime, have mixed forecasts for the second-quarter earnings of Naver and Kakao. Over the past 3 months, five brokerage firms revised upward their price targets for Naver. On the other hand, as many as 16 experts announced a downbeat forecast for the price target of Kakao.

Kakao is projected to log earnings that fall short of the market expectations in the second quarter due to prolonged weak sales, especially generated from advertisements.

“The ongoing workforce streamlining at Kakao’s major affiliates will persist throughout the second half of the year, leading to an increase in one-time costs in a short period of time,” said Kim Jin-goo, an analyst at Kiwoom Securities Co. “However, the anticipated profit improvement is expected to be evident from the following year.”

Kim revised the price target from 78,000 won to 70,000 won per share.

Naver, on the other hand, expects an upbeat forecast for its stock price.

“Naver’s presence in the stock market has been overshadowed since the start of the year. However, with the recent launch of HyperClova X and the upcoming introduction of CUE later this year, worries regarding artificial intelligence (AI) are anticipated to fade away,” said Ahn Jae-min, an analyst at NH Investment & Securities Co. “It is expected that the Q2 results will surpass market consensus, with projected revenue of 2.5 trillion won and operating profit of 375.5 billion won.”