April 25, 2024

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[THE INVESTOR] Naver’s profitability is not likely to improve meaningfully this year, said KB Investment and Securities on July 30, lowering the target price to 900,000 won (US$807.54) from 950,000 won while maintaining a “buy” recommendation. 

Its revenue in the second quarter rose 20.7 percent on-year to 1.36 trillion won but operating profit fell 12.1 percent to 250.6 billion won, according to the company’s earnings report. Aggressive hiring and marketing campaign for Naver Pay brought down the operating profit ratio from the same period last year, said analyst Lee Dong-ryun.

Investment expansion continued to drag down its profitability in the second quarter, and the ratio of its main businesses will continue to hover slightly over 30 percent in the latter half. Sudden spike in employees since last year has led to burgeoning costs while a dramatic turnaround in existing business is unlikely soon. The company needs more time before revenue from popular services improves, or new businesses such as artificial intelligence, self-driving cars and cloud computing begin to contribute, he added.

By Hwang You-mee (glamazon@heraldcorp.com)