[Click eStock] "Nakao, Lack of Urgency... AI Revolution at Risk Without Innovation"

Daol Investment & Securities maintained a 'neutral' opinion on the internet service sector on the 8th, stating that Naver and Kakao could suffer damage from the AI revolution if there is no strong innovation.

Researchers Kim Hajung and Cha Yoonji said, "The reason why performance remains dull even in the era of technological revolution is that generative AI is more of a supply revolution than a demand one, so B2C software shows little sales increase effect even when combined with AI," adding, "Also, there is a lack of urgency as new market entrants such as startups, who could fully enjoy the supply revolution, are not immediately visible."

The two researchers predicted, "If things continue as they are, startups preparing new services utilizing generative AI will take over the market," and advised, "We recommend holding weights defensively in preparation for a rise in center stocks caused by external factors unrelated to performance, such as interest rate cuts."

They added, "From a defensive perspective, we relatively prefer Naver, which shows stable performance."

Naver's third-quarter performance is expected to meet consensus. Sales are projected to rise 7% year-on-year to 2.61 trillion KRW, and operating profit is expected to increase 29% to 491.6 billion KRW.

In the case of Kakao, third-quarter performance is expected to fall short of consensus. Sales are forecasted to decline 1% year-on-year to 1.96 trillion KRW, and operating profit is expected to retreat 8% to 114.7 billion KRW.