[Into the Stock] AfreecaTV Up 104% This Year... "Is It Okay to Buy Now?"

AfricaTV's Strong Performance... Stock Price's Unstoppable Surge
Complementary Role, Not Competitors Like YouTube and Twitch

[Asia Economy Reporter Park Jihwan] AfreecaTV continues its unstoppable run, buoyed by strong earnings. The stock price, which was in the low 60,000 won range at the end of last year, recently jumped to the 120,000 won level. The securities industry expects further stock price increases as high growth in earnings is anticipated not only in the second quarter but also in the second half of this year.

Highlighting Advertising Platform...Outstanding Performance in the Second Half Following Q2

According to financial information provider FnGuide on the 15th, AfreecaTV's second-quarter sales and operating profit are estimated at 65.1 billion won and 20.4 billion won, respectively, representing increases of 43.7% and 90.7% year-on-year. Annual performance is also forecasted to be strong, with sales of 267.8 billion won and operating profit of 84.2 billion won, up 36.2% and 67.1% from the previous year.

The securities industry is focusing on AfreecaTV's growing presence as an advertising platform. In recent years, AfreecaTV's profit growth has come from an increase in average revenue per user (ARPU) in the platform sales segment and growth in paid subscribers (PU), driven by strengthened bonds between BJs (Broadcast Jockeys) and fans.

However, from this year, the value of AfreecaTV as an advertising platform is expected to be emphasized. AfreecaTV launched its own advertising sales platform, AAM, in March and added mid-roll ad products during live broadcasts. AAM is a platform that allows advertisers to purchase AfreecaTV ads through bidding without going through an advertising agency. Advertisers can purchase ads at reasonable prices through AAM's bidding system and improve advertising efficiency through detailed targeting by broadcast type and user.

After advertisers adapt to the AAM system, the effect of rising ad unit prices due to bidding is expected to appear, and platform sales growth will accelerate. Additionally, sports events like the Tokyo Olympics starting on the 23rd are expected to increase monthly unique visitors (MUV) in Q3 through BJs' sports broadcasts. Jeong Hoyoon, a researcher at Korea Investment & Securities, emphasized, "Platform advertising revenue is expected to increase, and brand content advertising will also grow as advertisers expand from mainly game companies to other industries."

The Appeal of AfreecaTV...Growth Potential and Customer Loyalty

AfreecaTV is a leading domestic video streaming platform. Its biggest strength is having over 6 million loyal viewers monthly. The average monthly viewing time per user exceeds 350 minutes.

The growth potential is also immense. Compared to other major advertising platforms, advertising revenue per viewer is about one-quarter, indicating high potential. AfreecaTV's advertising revenue last year was only 30 billion won. Calculated as annual advertising revenue per monthly active user (MAU), it is about 5,000 won. Kakao, with 45 million domestic users, recorded advertising revenue of 1 trillion won last year. Its annual advertising revenue per MAU exceeds 20,000 won. Samsung Securities researcher Oh Donghwan analyzed, "Although direct comparison is difficult due to different platform characteristics, it is clear that AfreecaTV has great advertising revenue potential relative to its loyal user traffic."

The advantage of being an advertising medium optimized for male viewers in their 20s and 30s is also significant. Among AfreecaTV's main users, 85% of all viewers are male, with 75% concentrated in their 20s and 30s. Researcher Oh emphasized, "As targeting in advertising becomes common, the appeal as a vertical advertising platform is highlighted," adding, "It is hard to find a medium as efficient as AfreecaTV for products and services targeting males in their 20s and 30s in sectors such as gaming, IT, automobiles, sports, and alcoholic beverages."

Especially since AfreecaTV is a platform optimized for game leagues and broadcasts, gaming-related ads account for 80% of total advertising revenue. Over the past four years, major domestic game companies' marketing expenditures have steadily grown at an average annual rate of 9.1%, surpassing 800 billion won last year alone. The structural growth of key advertisers' industries and their increasing marketing budgets aligned with market growth are good indicators of AfreecaTV's advertising revenue growth potential.

Despite High Valuation Concerns in Securities Industry... "Still Cheap"

AfreecaTV's stock price has settled in the 120,000 won range from 60,500 won last year, marking a 104% increase. Despite clear concerns about rapid stock price rises this year, the securities industry analyzes that the stock price rally will continue due to bright earnings prospects. Target price upgrades are also ongoing. Meritz Securities raised AfreecaTV's target price by 14.2% from 120,000 won to 137,000 won, stating that AfreecaTV's earnings growth as a leading domestic video platform has entered a virtuous cycle. The current average target price across the securities industry is 144,000 won, indicating about 16.6% upside from the current price.

Low competition intensity and high profitability are cited as reasons for future stock price increases. AfreecaTV's operating profit margin rose from about 20% in 2016 to 26% last year. Cost increases have been limited relative to sales growth. Considering that Chinese streaming companies have operating profit margins below 5% or are operating at a loss, AfreecaTV's high profitability stands out even more.

This stems from limited competition in the domestic streaming market. After AfreecaTV secured the domestic streaming market, global giants like Twitch and YouTube entered Korea, causing a decline in AfreecaTV's market share. However, YouTube specializes in general streaming broadcasts, and Twitch focuses on game streaming. In contrast, AfreecaTV specializes in visible radio, positioning itself complementarily to these companies. In other words, competition intensity is not high. Market share data since 2018 shows that each operator has maintained a certain level of market share and grown together. Researcher Oh said, "Low competition intensity in the domestic market is the background for AfreecaTV's high profitability," adding, "This is a factor reducing AfreecaTV's valuation discount compared to global streaming platforms."