[This Week's Focus] 'Naver' Revitalized by Strong Earnings and AI Momentum

First Domestic Platform Company to Surpass 10 Trillion KRW in Sales Last Year
"Performance Growth Expected to Continue This Year"
AI Business to Serve as Momentum

Editor's NoteDear individual investors dreaming of successful investments. How well do you know the stocks you invest in with your own money? In the unrefined and chaotic online environment filled with all kinds of information, Asia Economy aims to be your hands and feet, eyes and ears, delivering accurate information about companies. Each week, we focus on companies that ranked high in stock inquiries by the financial information provider FnGuide, delivering everything from basic information to analyses of related companies such as partners, clients, and investors. We will explain companies' financial conditions, performance status, and future value in an easy-to-understand manner. We meet you every week under the name of "This Week's Focus Stocks," or "This Week's Gwan.Jong."

NAVER is showing an upward trend after recovering from last year's stock price slump. The continued growth in performance, along with expectations that artificial intelligence (AI) will drive future sales, is believed to have influenced this trend. Securities firms are also viewing NAVER's AI strategy positively and are competing to raise their target prices.

NAVER's predecessor was Hangame. It was established in June 1999. In October 2002, it entered the KOSDAQ market under the name NHN. After transferring to the KOSPI market in June 2008, it was split and listed separately as NHN and NAVER in 2013. The company mainly operates in online advertising and content businesses.

Although the stock price was sluggish last year, it has shown an upward trend this year. Last year, it fell by 11.21% compared to the previous year, but as of the 10th of this month, the increase rate compared to the end of last year is 11.21%. This performance surpasses the KOSPI's rise of 5.08%.

The First Domestic Platform Company to Surpass 10 Trillion KRW in Sales

Current performance continues to grow. Sales increased from 6.8176 trillion KRW in 2021 to 9.7606 trillion KRW in 2023. Operating profit also rose from 1.3255 trillion KRW to 1.4888 trillion KRW during the same period. Notably, last year, sales exceeded 10 trillion KRW, making it the first domestic internet platform company to do so.

Last year's consolidated sales reached 10.7377 trillion KRW, and operating profit was 1.9793 trillion KRW, representing increases of 11.0% and 32.9%, respectively, compared to the previous year. In the fourth quarter of last year, sales and operating profit were 2.89 trillion KRW and 540 billion KRW, respectively. Operating profit slightly exceeded market expectations of 529.4 billion KRW.

Ahn Jae-min, a researcher at NH Investment & Securities, said, "Sales of 59.4 billion KRW and operating profit of 47.4 billion KRW related to Line Yahoo (LY) settlement were reflected as one-time items," adding, "Considering some one-time costs related to NAVER Webtoon, the results were not bad, and above all, the sales growth rate was notably outstanding."

Kim So-hye, a researcher at Hanwha Securities, evaluated, "Despite limited seasonal effects in the fourth quarter of last year, sales of search advertising (SA) and digital advertising (DA) increased due to the expansion of Home Feed inventory and advanced targeting," adding, "Commerce sales showed strong performance, driven by the rebound of the previously sluggish shopping search ads and the launch effect of Plus Store."

Continued Growth This Year... "Commerce Will Lead"

According to FnGuide, securities firms forecast NAVER's sales and operating profit this year to be 11.843 trillion KRW and 2.2815 trillion KRW, respectively, representing increases of 10.29% and 15.27% compared to the previous year.

Lee Ji-eun, a researcher at Daishin Securities, explained, "Through last year's fourth-quarter results, we confirmed continued strong advertising performance and a rebound in commerce's gross merchandise volume (GMV)," adding, "If the steady growth of commerce advertising and GMV is visualized in the first half of this year through new commerce services, the stock price is expected to continue its upward trend."

Jung Ui-hoon, a researcher at Eugene Investment & Securities, said, "This year, the commerce sector, which is preparing to launch a separate app for Plus Store in the second quarter, is expected to drive NAVER's overall performance growth," adding, "On-service AI applied to each business sector is expected to contribute to improving service quality."

"AI Is a New Momentum... Will Boost Performance"

The securities industry is positively evaluating NAVER's AI strategy recently revealed in its conference call. NAVER plans to incorporate AI into upcoming services.

First, the personalized shopping service "NAVER Plus Store," to be launched in the first half of this year, will use AI to analyze reasons for product recommendations for each user. It will also provide customized benefits and trend information.

In addition to "AD Boost," an AI platform specialized for advertising for online shopping mall operators, "AI Briefing," which acts as a personal assistant for each user, will be newly added to the search service. Furthermore, for large language models (LLM), collaboration with various external AI models will also be explored.

Choi Soo-yeon, CEO of NAVER, said in the conference call, "DeepSeek, which recently caused a stir in the market, suggests that even latecomers can catch up with big tech at low cost," adding, "We are focusing on strengthening inference capabilities to prevent the technology gap from widening with leading companies."

Following this, on the 10th, 17 securities firms published reports on NAVER, with 11 of them raising their target prices. Securities firms expect AI to drive future sales. Researcher Ahn Jae-min said, "The DeepSeek effect provides an opportunity for latecomers in the AI business to catch up, alleviating excessive concerns," adding, "NAVER will advance AI in its services, which will contribute to performance growth."

Along with this, AI is expected to serve as momentum for the growth of existing businesses. Oh Dong-hwan, a researcher at Samsung Securities, said, "Despite the economic downturn, steady sales growth continues through platform and service restructuring, and with the trend of declining inference costs of global AI models, the expansion of NAVER's AI service application is expected," adding, "With the recovery of core business growth and the addition of new AI business momentum, the stock price is expected to continue its upward trend."