[Click eStock] "Kakao Partners with OpenAI... Anticipation for Platform Revamp"

Target Price Raised from 46,000 KRW to 52,000 KRW

Sangsangin Securities has raised the target price for Kakao from 46,000 KRW to 52,000 KRW, expecting a major platform overhaul based on collaboration with OpenAI. The investment rating was maintained as 'Buy.'

Choi Seung-ho, a researcher at Sangsangin Securities, stated, "With the collaboration with OpenAI, KakaoTalk is expected to transform significantly from a purpose-driven platform to a context-driven one, much like an SNS. It was an excellent decision for a company that needed change to reduce costs while combining GPT with KakaoTalk." He explained that the platform overhaul was necessary as KakaoTalk's newly launched 'Pung' service recorded somewhat low usage rates and the expansion of advertising products faced limitations.

Researcher Choi added, "Since it has been confirmed that KakaoTalk's primary use is as a communication tool rather than a multi-purpose SNS, it is difficult to say that multi-functionality is directly linked to the company's growth. To show meaningful growth, there needs to be user-side merits that surpass competing platforms."

Content stagnation is also an issue that needs to be addressed. In the fourth quarter of last year, Kakao's revenue was 1.9591 trillion KRW, and operating profit was 106.7 billion KRW, down 2% and 34% respectively compared to the same period last year, falling short of market expectations. Researcher Choi diagnosed, "Content revenue was 910.1 billion KRW (down 7% from the previous quarter), with a particularly severe slump in games (163 billion KRW, down 30% from the previous quarter). It is somewhat difficult to expect Piccoma and Enter to offset the game slump and achieve growth this year, and the game lineup is concentrated in the second half. Therefore, content is expected to continue facing difficulties until the first half."