Meritz Securities has lowered its target price for NAVER from 330,000 won to 270,000 won, citing concerns that declining profitability in existing businesses will outpace the performance of new ventures. The firm anticipates ongoing cost burdens due to investments in infrastructure, marketing, and logistics expansion.
Lee Hyo-jin, a researcher at Meritz Securities, noted, "In the third quarter, NAVER's consolidated revenue and operating profit were 3.4724 trillion won and 451.3 billion won, respectively, marking a 10.7% increase in revenue but a 20.9% decrease in operating profit compared to the same period last year, falling short of market expectations." He explained that investments in infrastructure and marketing for core businesses, primarily advertising and commerce, exceeded anticipated levels.
Lee further stated, "While we initially expected investment costs for devices to peak in 2026, additional investments related to the expansion of offline integrated device operations and the establishment of logistics subsidiaries are anticipated to continue, leading to sustained cost pressures. We believe managing costs will remain challenging into 2027, prompting a significant downward revision of our earnings outlook."
He projected that the separate business margin would decline from 28% in 2025 to 19% in 2026, without rebounding thereafter. Lee pointed out, "The investment costs necessary to maintain existing operations are resulting in profit declines without corresponding revenue growth."
While he acknowledged that the Neo Cloud new business could transform the company's future core profits, he cautioned that the negative impact on existing business profits due to increased investments is more certain than the confirmation of new business performance.
Lee concluded, "The adjustment of the target price is due to the downward revision of earnings and the change in the target period to 2027. We expect market sentiment to shift when we communicate reasons for buying and managing reasons against buying in market language."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.