Brokerage houses raise target prices for Kakao on business expansion

Backed by aggressive moves to go beyond its platform business, South Korean brokerage firms have painted a rosy outlook for Kakao and raised their target prices on the company, reports showed Monday.

Some analysts predicted the popular mobile messenger KakaoTalk operator’s stock price to rise as high as 200,000 won ($175.80), up from their prior target prices. The adjustment came after the company jumped to the third most valuable stock on the nation’s main board Kospi.

“Kakao’s market capitalization surged to 68 trillion won, which is even exceeding Naver’s market value. … It is due to Kakao’s business structure that is based on future growth. The firm’s business strategy of becoming the market’s dominant player first to realize profits also worked,” said Oh Dong-hwan, an analyst at Samsung Securities.

The market watcher also mentioned that it was sufficiently predictable to see Kakao become Kospi’s third-largest stock in line with industrial structure changes. At the same time, Oh forecasts that the tech giant behind KakaoTalk will further accelerate its major businesses growth.

Hana Financial Investment also raised its target price for Kakao by 35 percent to 190,000 won as the securities firm predicted the company’s stock price to further rise in the latter half of this year with various momentum and its market competitiveness.

“Not only its initial services but other (affiliated companies’) businesses such as finance and mobility are expected to turn around. Kakao Entertainment has been growing as well by producing and distributing various contents,” said Hwang Seung-taek, an analyst at Hana Financial Investment.

Other brokerages, including Hyundai Motor Securities and DB Securities, also raised their target prices on expectations for Kakao subsidiaries’ upcoming initial public offering and solid contents business, respectively.

Shares of Kakao hit an all-time high of 159,500 won during intraday trading Monday, up 2.9 percent from the previous session’s close. Following the stock price rise, its market cap also at one point surpassed the 70 trillion-won mark for the first time. The stock erased some earlier gains to close at 155,000 won, since Kospi slumped 0.83 percent.

By Jie Ye-eun (yeeun@heraldcorp.com)