[Click eStock] "Naver, Acquisition of US Poshmark 'A Needed Change'"

[Asia Economy Reporter Kwon Jae-hee] Daol Investment & Securities maintained a 'Buy' rating on Naver on the 5th but lowered the target price from 380,000 KRW to 260,000 KRW.

Daol Investment & Securities evaluated Naver's acquisition of the U.S. secondhand fashion platform Poshmark, announced in a disclosure the previous day, as a "necessary change." Through this acquisition, Naver aims to boost its declining revenue growth rate and directly enter the North American e-commerce market.

Naver will acquire 100% of Poshmark's shares through its subsidiary Proton Parent. The acquisition price is $1.6 billion, and the enterprise value, after deducting unpaid amounts from cash holdings, is $1.2 billion, corresponding to 3.3 times the 2022 price-to-sales ratio (PSR). Although this is higher than the industry average of 2.4 times, the difference in potential market growth rates should also be considered. The expected average growth rate of the secondhand market over the next five years is 20%, while the e-commerce market growth rate for the same period is about half at 11%.

Naver is expected to achieve adjusted EBITDA profitability by 2024.

For the third quarter, sales are projected to be 2.1 trillion KRW, with operating profit at 320.6 billion KRW. The operating profit forecast has been lowered by 12.9% compared to previous estimates, reflecting increased labor costs due to the inclusion of the new subsidiary.

The search platform segment is estimated to have an 8.2% year-over-year sales growth rate, slightly down from the previous 9.6%, due to the continued slowdown in display advertising growth. Search advertising estimates remain unchanged, and the commerce segment is expected to maintain sales growth similar to the previous quarter.

Researcher Kim Jin-woo of Daol Investment & Securities stated, "The acquisition of overseas growth companies to overcome the multiple decline caused by the slowdown in existing business growth is considered a long-term factor for enhancing corporate value. However, due to margin decline and falling multiples in competing groups, we lower the target price to 260,000 KRW."