[Edaily Reporter Kim Kyung-eun ] On the 10th, LS SECURITIES lowered its target price for Kakao(035720)to 55,000 won—a 16.7% reduction from the previous target—citing a weakening in artificial intelligence (AI) momentum. The firm maintained its “Buy” rating.

Seon Yu-jin, an analyst at LS SECURITIES, stated in a report released that day, “As the stock passes through a lull in AI momentum, the share price is undergoing a sustained correction.”

Seon explained, “Kakao is integrating various AI services within its platform with the goal of creating an AI super app,” but added, “The pace of adoption and improvements in user experience are proceeding somewhat slowly.” She went on to emphasize, “It is important to note that as AI services are delayed, market expectations continue to rise.”

He said, “Before its second-quarter earnings announcement, Kakao plans to integrate external partners into ‘Kanana in KakaoTalk’ to unveil a killer service that enables agent-based recommendations, search, and payment all within KakaoTalk,” adding, “However, for this service to fit within the framework of AI monetization, it must meet the challenges of optimized targeting, a user experience that differentiates it from existing e-commerce platforms, and a tangible contribution to profitability.”

Nevertheless, he assessed that Kakao’s massive user base and data assets remain competitive advantages. He believes that while it will be difficult for AI services or social networking services (SNS) to replace the Kakao platform in the short term, Kakao can leverage these assets as growth drivers as it continues to advance its AI services.

He analyzed, “The value of Kakao’s assets—including its massive user traffic and accumulated data—is expected to remain robust through the second half of this year or into next year, when ‘agent-based killer services’ are anticipated to become firmly established,” adding, “Opportunities to leverage these assets as a growth catalyst still remain.”

He further assessed, “With solid performance in the platform segment supporting the stock price from the downside, this is the time to observe a gradual narrowing of the discount rate as AI services are further enhanced.”

Kakao’s consolidated revenue for the second quarter of this year is projected to be 2.0742 trillion won, with operating profit at 226.1 billion won—representing year-over-year increases of 8.2% and 10.9%, respectively—and is expected to meet market consensus.

The firm expects the platform business to drive earnings. Advertising revenue is estimated to rise 17.4% year-over-year, as the expansion of ad space following the KakaoTalk redesign continues to yield benefits, coupled with an increase in message ads sent by financial institutions due to government subsidy disbursements.

The commerce segment is expected to grow by 7.1% due to robust growth in transaction volume and the deferred revenue recognition effect from the previous quarter. The “Other Platform” segment is also projected to grow by 22.2%, as increased mobility demand in May and June is expected to offset the impact of the ban on recognizing commission revenue from Kakao Taxi’s roaming operations.

kakaopay is also expected to post strong results, driven by increased securities trading volume and expanded payment volume. In contrast, the Content segment is projected to remain at last year’s level overall, as continued weakness in the Story division offsets growth in the Music business. The company analyzed that the high profitability of the Platform business will offset increased marketing expenses at its Japanese subsidiary, Piccoma.