[Click eStock] "Naver, Q2 Advertising Revenue Turnaround... Need to Expand Share"

[Asia Economy Reporter Kwon Jaehee] NH Investment & Securities maintained its 'Buy' rating and target price of 270,000 KRW for NAVER on the 6th.

NAVER's Q4 earnings are estimated at 2.27 trillion KRW in revenue and 336.5 billion KRW in operating profit. Although revenue growth slowed due to the global economic downturn, operating profit slightly missed the previous estimate of 343.8 billion KRW and the market consensus of 346.1 billion KRW due to cost reductions.

This performance is interpreted as a result of sluggish advertising revenue caused by the economic slowdown despite the peak season. The search platform recorded 916.4 billion KRW (search ads 660.2 billion KRW, display ads 249.8 billion KRW), growing only 2.3% year-on-year.

Personnel expenses, including development and operation costs, increased to 561.5 billion KRW but showed a slowing trend, while marketing expenses decreased to 321.6 billion KRW compared to the previous quarter due to reduced commerce and Pay reserves.

Jaemin Ahn, a researcher at NH Investment & Securities, analyzed, "Advertising revenue is expected to slow down until Q1, the off-season, and the acquired Poshmark's performance will be reflected on a consolidated basis, which may negatively impact operating profit. However, a turnaround in advertising revenue is expected from Q2, and if the economy gradually recovers in the second half, the advertising and commerce business revenues, which were contracted in the first half, will rebound quickly."

Researcher Ahn added, "Despite the slowdown in growth rates of advertising and commerce businesses due to economic impacts, now is actually the time to increase our weighting."