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| Corporate logos of Naver and Kakao / Courtesy of each firm |
By Lee Min-hyung
Shares of Naver and Kakao ― two representative internet stocks here ― are losing almost all of their pandemic gains amid a pessimistic outlook on their earnings growth.
The stock price of Naver hit an all-time high of 465,000 won ($359) per share in July 2021 on then-growing expectations for the rise of the contactless economy. But the tech giant has since failed to extend the glory, with its share price continuing to display a steep downward trajectory to below 200,000 won per share.
This is a drop of more than a half, and the outlook remains cloudy over short-term recovery due to its weak earnings recovery. According to data from market tracker FnGuide, Naver is estimated to attain an operating profit of 361.7 billion won in the third quarter, up merely 7.58 percent from a year earlier. The slowdown in earnings growth is attributed to the overall downturn in the advertising market.
The internet companies plan to release their game-changing artificial intelligence (AI) chatbots to seek a major breakthrough in its dismal stock performance.
But market analysts said the internet giants will not be able to achieve outstanding stock growth without generating solid earnings performance in their AI businesses.
"The release of a new AI model will not lead directly to Naver's stock growth unless its AI-related businesses improve their earnings," Lee Ji-eun, an analyst at Daishin Securities, said. "AI will help the companies improve their earnings growth from a longer-term viewpoint."
Shares of Kakao ― a dominant mobile platform operator here ― also showed a similar pattern to Naver's. Kakao's share price enjoyed its heyday in mid-2021, but has since declined sharply. It hit a record high of 173,000 won per share in the summer of 2021, but that has fallen to around 50,000 won, a drop of more than 70 percent.
According to the forecast by FnGuide, Kakao's operating profit between July and September will come in at around 148.3 billion won, down 15.9 percent from a year ago. Earlier, Kakao said the company is forecast to suffer an operating loss of up to 300 billion won this year due to aggressive investment in the highly anticipated AI sector.
The company generated a weaker-than-expected earnings performance in the first quarter with an operating profit of 71.1 billion won, far below an earlier market consensus of around 122.7 billion won.
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