[Asia Economy Reporter Hwang Yoon-joo] Kakao, which hit a 52-week low last month and plummeted, is getting back on its feet. Since the second half of the year began, Kakao's stock price has risen by more than 9%. With important economic indicators scheduled for release next week that will gauge the Federal Reserve's (Fed) next moves, the upward trend of growth stocks like Kakao will need to be closely watched.
According to the Korea Exchange on the 20th, Kakao's stock price rose 9.73% from 69,900 KRW to 76,700 KRW during the second half of the year (July 1 to August 19).
The stock price began to rise significantly thanks to better-than-expected second-quarter earnings. On the 5th, Kakao announced that its operating profit for Q2 increased by 5.2% year-on-year to 171 billion KRW. Revenue was recorded at 1.8223 trillion KRW, up 34.8%.
Concerns had emerged that profitability would decline due to a slowdown in Talk Biz growth caused by inventory limits and increased labor and marketing costs. However, after the earnings announcement, expectations arose for inventory expansion of Biz Board and additional open chat advertising in the second half of the year.
Jinwoo Kim, a researcher at Daol Investment & Securities, said, "Both in terms of profit and stock price, a rebound in the growth rate of the core Talk Biz business was necessary. Growth and profit margin improvement are possible through advertising space expansion and monetization of open chat rooms."
Researcher Kim predicted, "The sales for four quarters immediately after the Biz Board launch are estimated at 194 billion KRW," adding, "It is expected to record an annual growth rate of over 100% thereafter."
It is also interpreted that the US Consumer Price Index (CPI) peaked at 9.1% in June and slightly eased, raising expectations that inflation has peaked. As opinions emerged that the pace of interest rate hikes could slow down, the risk of decline in growth stocks has diminished.
Since July, pension funds and others have net purchased Kakao shares worth 75 billion KRW. Overall institutional investors, including financial investment firms, bought shares worth 140 billion KRW.
However, whether Kakao will continue its upward trend remains uncertain. Although Q2 earnings exceeded some market concerns, next week's US core personal consumption expenditures (Core PCE) inflation indicators and the Jackson Hole meeting are variables.
These are used as key indicators for the Fed's inflation assessment and are considered materials to gauge policy direction. This means volatility related to interest rate hikes still exists.
Namjoong Moon, a researcher at Daishin Securities, stated, "From a mid-term perspective, sectors with low volatility and high dividends that can guarantee earnings stability (energy, consumer discretionary, industrials) and growth stocks (IT, healthcare, ESG, electric vehicles & secondary batteries, aerospace, metaverse) need to increase their weighting during price adjustments in the first half of the year."
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