[Click eStock] "AfreecaTV, Update Will Be a Trigger for Earnings Rebound"

[Asia Economy Reporter Lee Jung-yoon] Meritz Securities maintained a buy rating and a target price of 110,000 KRW on June 10 for AfreecaTV, stating that user donation economy and other updates in the first half of this year are expected to impact its performance.

In the fourth quarter of last year, AfreecaTV's consolidated revenue increased by 6% year-on-year to 79.9 billion KRW, while operating profit fell 37% to 15.5 billion KRW, missing expectations.

The donation economy revenue, which has the highest correlation with profit, declined more than expected, leading to a decrease in operating profit. Other expenses included amortization of intangible assets, and net profit decreased due to a corporate tax impact of 4.6 billion KRW following a tax audit.

AfreecaTV plans to launch and operate a local platform service with Vietnam's state broadcaster VTVCab within the first half of this year. In this contract, AfreecaTV will focus on providing technical support by dispatching personnel rather than direct capital investment. Although the new business is expected to increase personnel somewhat, the overall wage growth rate will be limited by revenue growth.

Additionally, since June 7, new video uploads on competitor Twitch have been halted, triggering streamer movements. Furthermore, by providing broadcasts of the League of Legends Champions Korea (LCK), which the competitor abandoned, user metrics have rebounded significantly.

Diversification in age groups was also observed, with Minecraft content centered on so-called virtual YouTubers (VTubers) featuring virtual characters ranking highly, indicating an influx of younger users compared to AfreecaTV’s traditional main age group. AfreecaTV also announced that donation economy revenue began to recover last month.

Researcher Lee Hyo-jin of Meritz Securities explained, "AfreecaTV is preparing a large-scale update within the first half of the year to promote convenience and incentives for content providers and consumers amid the changed competitive environment, including payment methods related to the donation economy." He added, "The donation economy is a key strength, and if donation economy revenue rises significantly, it is expected to act as a catalyst for content providers' incentives."

He continued, "The business has caught a favorable tailwind due to changes in the competitive environment," adding, "We believe consumer and content provider responses to the updates will be the trigger for a performance rebound."