[Click eStock] "AfreecaTV, Advertising Revenue Growth to Continue"... Target Price Up

On the 2nd, Korea Investment & Securities raised its target price for AfreecaTV from 100,000 KRW to 120,000 KRW, maintaining a buy rating, stating that the value of AfreecaTV as an advertising platform is being highlighted and advertising revenue growth is expected to continue this year.

AfreecaTV's sales in the first quarter of this year decreased by 3.4% year-on-year to 72.7 billion KRW, and operating profit fell by 20.5% to 18.4 billion KRW, missing the consensus estimate of 19 billion KRW. However, in terms of content, the performance is considered promising enough to expect a stock price rebound. In particular, attention should be paid to the platform sales reaching 60.5 billion KRW, setting a new all-time high. Notably, the number of paying users (PU) stopped declining at 222,000, and ARPPU (average revenue per paying user) recorded 273,000 KRW, showing an upward trend. Advertising revenue was sluggish at 11.4 billion KRW.

Jung Ho-yoon, a researcher at Korea Investment & Securities, explained, "This performance completely wiped out the platform's weakness, which was the cause of last year's stock price decline. Especially, the PU continuously fell from 258,000 in the first quarter of last year to 218,000 in the fourth quarter, raising concerns about the platform's long-term growth potential, but it recovered again in this first quarter, dispelling those concerns."

He added, "The automatic recharge renewal to enhance payment user convenience was completed during the first quarter, and various updates to simplify the payment process are ongoing, so we expect PU and ARPPU to recover again throughout this year. Although advertising revenue was temporarily sluggish in the first quarter, the value as an advertising platform is being highlighted, so advertising revenue growth will steadily continue this year."

Researcher Jung also stated, "Resolving uncertainties related to the platform business is a key factor for the stock price rebound, and since the recovery of current sales is confirmed, investors should look for buying opportunities."