Naver Price Target Cut, but... “AI Is a Matter of Faith”

[Financial News] On the 13th, Hana Securities lowered its price target for Naver from 400,000 won to 340,000 won, reflecting slower growth in its core business and rising costs. However, it maintained its positive outlook for the new artificial intelligence (AI) business and kept its “Buy” rating. 
Lee Jun-ho, an analyst at Hana Securities, said, “The positive view of the new business is unchanged, as we have revised our estimates for the core business more conservatively,” adding, “If there are no doubts about AI demand, this is the time to buy.”
Naver’s consolidated third-quarter revenue rose 10.7% year on year to 3.4724 trillion won, while operating profit fell 20.9% to 451.3 billion won, coming in slightly below market expectations. 
The analyst explained, “The main factor was weaker-than-expected performance in advertising and commerce, Naver’s core businesses,” adding, “The company is trying to monetize repeat visits to the AI tab and conversions to transactions, but strong growth in the short term appears difficult.”
The cost burden also increased. In the third quarter, infrastructure costs were 282.3 billion won, up 29.1% from a year earlier, while marketing costs rose 32.3% to 663.9 billion won. The increases were driven in part by the delivery of computing assets for internal use, the launch of a new data center, commerce marketing, and the rollout of Npay Connect terminals.
Consumer AI agents and enterprise AI Factories are expected to become growth drivers next year. Naver plans to launch an AI agent app capable of executing tasks later this year.
The analyst said, “The new service has the advantage of providing external services through browsing while also connecting its own search, commerce, maps, payments and other functions via APIs,” adding, “Starting next year, local vertical services will serve as substantial barriers to entry in the consumer agent market.”
AI Factory has signed a long-term contract worth 2 trillion won over four to five years with an AI inference company in North America. The analyst said, “We are in discussions with more than 10 global companies, so additional contracts will continue to materialize,” adding, “The company has already secured more than 200 MW of AI data center capacity, putting it in a position to benefit from future contracts and rising GPU rental prices.”
The business combination between NAVER Financial Corporation and Dunamu Inc. was also cited as a factor to watch. He added, “A review of the business combination is scheduled for the Korea Fair Trade Commission’s plenary meeting on the 18th,” and, “If uncertainty clears and entry into the digital asset business also comes into clearer view, that would be a clear upside catalyst.” 

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