[Edaily Reporter Kim Kyung-eun ] On the 6th, DaishinSecurities lowered its target price for Kakao(035720)from 47,000 won to 43,000 won, a 8.5% reduction. While third-quarter earnings were generally in line with market expectations, the firm believes it will take time to confirm tangible results from the artificial intelligence (AI) business. The investment rating remains “Buy.”

Jeong Hae-chang, an analyst at DaishinSecurities, stated in a report released that day, “We have lowered the valuation multiple for the Kakao platform to 22.6x to reflect the base effect from the Talk service overhaul starting in the fourth quarter and the need to verify AI performance.”

Kakao posted revenue of 2.0867 trillion won and operating profit of 240.3 billion won in the third quarter of this year. These figures represent year-over-year increases of 6.3% and 7.4%, respectively. While they exceeded DaishinSecurities’ previous forecasts by 3.2% and 7.3%, respectively, operating profit fell 3.1% short of the market consensus (248.3 billion won).

DaishinSecurities gave a positive assessment of the growth momentum in Kakao’s advertising and commerce businesses. Although third-quarter TalkBiz revenue decreased by 1.6% quarter-over-quarter due to the seasonal off-peak period, it increased by 12.7% year-over-year, continuing its double-digit growth trend. Analysts attribute this to the platform business offsetting the slump in the content business.

The firm projected that display advertising and messaging revenue would maintain double-digit growth in the fourth quarter as well. The outlook suggests that the advertising business will continue to grow despite a high base caused by the impact of the KakaoTalk redesign last September being reflected in the comparison figures.

However, analysts pointed out that the monetization potential of the AI business remains uncertain. Kakao plans to launch AI services such as “Kanana Space,” “Everyone’s AI,” and “Kanvas” during the fourth quarter.

Analyst Jeong explained, “Until the AI strategy—which has long been touted as a growth driver—becomes tangible, the evidence for structural growth remains somewhat lacking,” adding, “There are limits to how much the stock price can preemptively reflect both user expansion and the profit contribution from new revenue models before the services are launched.”

He added, “If consumer utility and contributions to platform revenue are confirmed following the large-scale expansion of AI services, it will be possible to raise the target price through a reassessment of projected earnings and valuation.”

The analyst gave a positive assessment of the shareholder return policy. Along with its earnings announcement, Kakao disclosed a plan to repurchase and cancel 150 billion won worth of its own shares. The company plans to execute half of Kakao X’s three-year, 300 billion won shareholder return plan prior to the stock split, with the remaining 150 billion won to be returned sometime in 2027.

Analyst Jeong commented, “By implementing shareholder returns prior to the spin-off, remaining shareholders who will receive allocated shares after the split will also benefit,” adding that “this is a measure that enhances confidence in the company’s commitment to shareholder returns and its ability to execute.”