Naver's Earnings Growth Potential Despite Weak Search Performance [Click e-Stock]

Maximizing Advertising Efficiency with AI
The 'De-Coupang Effect' Also a Positive Factor

There are concerns that Naver's advertising revenue could be shaken as search demand shifts to artificial intelligence (AI) services offered by major overseas tech companies. However, there are also forecasts that Naver’s performance can continue to improve. Analysts suggest that Naver can maintain its growth by maximizing advertising efficiency through AI and increasing the overall commission rate in e-commerce.

On January 15, Yuanta Securities maintained its target price for Naver at 360,000 won and its ‘Buy’ investment rating, citing these factors. The previous day’s closing price was 259,000 won.

Naver’s fourth-quarter results last year are expected to show sales of 3.2309 trillion won and operating profit of 596.4 billion won, representing year-on-year increases of 12.0% and 10.0%, respectively. In the advertising segment, the temporary effect of settlement payments from LY Corporation (about 30 billion won each for advertising and cloud) will be removed, which will slow the growth rate. However, by maximizing advertising efficiency across multiple platforms-such as integrated search, display advertising (DA), and shopping ads-Naver is expected to maintain a high single-digit growth rate.

In commerce, results are expected to show more than 30% growth compared to the same period last year. The increase in overall commission rates and higher travel-related sales, which carry higher commission rates, are cited as positive factors. Improved performance from Poshmark in the United States and the so-called ‘de-Coupang effect’ are also seen as favorable elements.

Regarding the ‘de-Coupang effect,’ after the Coupang personal information leak incident, Coupang’s daily active users decreased by 17.7% in December last year, whereas Naver Plus Store’s daily users increased by 15.2% during the same period. Although Poshmark faced challenges from low-priced competition by Chinese e-commerce companies, it has benefited since May 2 last year, when the United States eliminated duty-free status and imposed tariffs on Chinese goods priced under $800.

Concerns about a decline in search usage are also expected to be overcome. Lee Changyoung, a researcher at Yuanta Securities, explained, “Google continues to see strong growth in advertising revenue by increasing advertising efficiency through AI Gemini and AI Overview. Similarly, Naver is increasing the proportion of ‘AI Briefing’ and enhancing advertising efficiency with its AI-based advertising system ‘AD Boost,’ achieving advertising growth even in a challenging environment, much like Baidu in China.”

Yonhap News Agency