[Drifting Korean-style AI]④ Stock Price Falls Despite Record Performance... Naver's Monetization Strategy Fails to Work

Naver Stock Price Drops Over 30% Since Early Year
Declines Despite Record Quarterly Earnings in Q2

Naver, losing ground in the artificial intelligence (AI) search market, is also reflected in its recent stock price trends. Although its Q2 earnings this year marked a record high on a quarterly basis, market response to its AI growth direction remains lukewarm.

According to the Korea Exchange on the 20th, as of the 19th, Naver's stock price closed at 156,600 KRW, down 0.57% from the previous day. Compared to 227,500 KRW at the beginning of the year, it has dropped more than 30%. The difference from the 52-week low of 151,100 KRW is 5,500 KRW.

Naver recorded its highest-ever earnings in Q2. Consolidated revenue increased by 8.4% year-on-year to 2.6105 trillion KRW, and operating profit rose by 26.8% to 472.7 billion KRW. By segment, Search Platform, Commerce, Fintech, and Cloud all showed growth.

Despite balanced growth, Naver's stock price declined due to a bleak outlook on future businesses. At the Q2 earnings briefing, Naver revealed its AI-related strategies. It announced that it is considering launching the AI search service Cue: on mobile within the year, which is linked to the large language model (LLM) 'HyperCLOVA X.' Cue was unveiled last September and is currently only available on the PC version.

The most disappointing aspect is the lack of a concrete revenue model. Naver plans to advance by combining AI models with search, advertising, and commerce services. However, unlike global big tech companies such as OpenAI and Google, it is not considering monetization through separate subscription fees. Naver CEO Choi Soo-yeon stated, "We are strategically reviewing services using LLM for conversational agents and shopping recommendations, but currently, we plan to focus on enhancing existing revenue models by combining search with advertising and commerce."

The market interprets this as Naver stepping back from competing head-to-head with big tech companies that are heavily investing capital in LLM development. It appears that Naver intends to take a different path by integrating AI models with search, advertising, and commerce rather than direct competition through AI models.

After the Q2 earnings announcement, securities firms lowered their target stock prices. Samsung Securities cut the target price from 250,000 KRW to 240,000 KRW, and Eugene Investment & Securities lowered it from 289,000 KRW to 240,000 KRW.

Lee Junho, a researcher at Hana Securities, said, "Since stable profit generation is expected domestically, its attractiveness could be highlighted," but added, "However, flexible re-rating (value reassessment) is expected to be possible depending on the visibility of commerce and content growth recovery, proof of AI competitiveness, and global mid-to-long-term strategies." Lee Chang-young, a researcher at Yuanta Securities, said, "Although Naver's operating profit in the first half of 2024 increased by 30% compared to the same period last year, it has experienced continuous multiple declines due to concerns over weakened AI competitiveness."