Despite KOSPI's Soaring Rally, Untact Leading Stocks Falter

November Growth Rate: Naver -0.35%, Kakao 11%... KOSPI Up 14%
Most of Top 10 Market Cap Stocks Show Double-Digit Growth... Relatively Weak Performance

[Asia Economy Reporter Minwoo Lee] While the KOSPI is soaring to new highs, the leading untact (non-face-to-face) stocks NAVER and Kakao have been relatively sluggish.

As of 10:06 a.m. on the 27th, NAVER's stock price recorded 284,500 KRW, down 0.35% from the previous day. Since the beginning of this month, it has struggled to surpass the 280,000 KRW mark. Compared to the closing price of 285,500 KRW on the 2nd, it has actually dropped by 0.35%. During the same period, the KOSPI rose by 14.2%. This contrasts sharply with the KOSPI’s intraday record high of 2,642.26 on the 25th, continuing its upward momentum. Kakao shows a similar trend. At the same time, its stock price was 372,000 KRW, down 0.53% from the previous day. This is about an 11% increase compared to the beginning of the month, but still below the KOSPI’s growth rate during the period.

Compared to other top market capitalization stocks, NAVER and Kakao’s growth rates are underwhelming. Most stocks have shown double-digit growth since the start of the month. As of 10 a.m. that day, Samsung Electronics, the top market cap leader, rose 18.6%. It also recorded new highs during this period. Many other stocks showed growth rates exceeding 20%, including SK Hynix (24.4%), LG Chem (29.7%), Celltrion (35.4%), and Samsung SDI (23.2%). NAVER is the only stock that declined compared to the beginning of the month. Kakao ranked 7th in growth rate among the top 10 market cap stocks.

For NAVER, investor interest seems to have cooled as profits have stagnated for seven consecutive quarters, despite increases in NAVER Pay points and global marketing for Webtoon. Although sales growth in key business units such as display advertising, commerce, fintech, and Webtoon remains solid, profit stagnation due to increased Pay point costs (partner fees and marketing expenses) and global Webtoon marketing expenses has caused a loss of momentum for stock price growth. Since NAVER Shopping’s transaction volume is steadily growing and the number of customers linking bank accounts to NAVER accounts is expanding, NAVER Pay point payments are expected to continue into next year. Because points are paid as a certain percentage of transaction volume, point costs are expected to increase as transaction volume grows.

Webtoon is still running at a loss. Although monetization is underway, it has not yet reached the break-even point. This is because a mid-to-long-term strategy is in place to start monetization after securing a sufficient user base. Currently, the global monthly active users (MAU) are known to be around 67 million. During the Q3 earnings conference call, aggressive spending plans were announced for the near term, so Q4 operating profit is unlikely to improve significantly compared to the previous quarter. Additionally, Q1 is an off-season for all business units. Mina Lee, a researcher at Daishin Securities, predicted, "Operating profit could grow in Q2 compared to the previous quarter as the peak season effect appears and Webtoon monetization proceeds more aggressively."

Kakao is somewhat quiet as funds are flowing into cyclical rotations focused on semiconductors and secondary batteries. Its earnings continue to show steady growth. In Kakao Commerce, both sales and profits are growing. Based on KakaoTalk Gift’s absolute market share in the e-coupon market, it recorded an operating profit margin of about 25% last year, higher than general commerce companies. With the increase in non-face-to-face contact due to COVID-19, the age range and usage frequency of KakaoTalk Gift have rapidly expanded. Additionally, the introduction of highly profitable delivery products and high-end luxury goods is improving both scale and profitability simultaneously.

Researcher Donghwan Oh of Samsung Securities said, "Kakao is expanding the introduction of revenue models based on its secured users, showing simultaneous growth in sales and profitability across all business units including commerce, advertising, Pay, banking, mobility, Webtoon, and gaming," and forecasted, "Kakao’s operating profit will grow at an average annual rate of over 70%, surpassing 1 trillion KRW by 2022."