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Investing.com - UBS upgraded Kakao Corp . (KS:035720) from Neutral to Buy, raising its price target to KRW73,000.00 from KRW45,000.00, citing improving fundamentals and early signs of revenue recovery.
The South Korean internet company reported second-quarter operating profit of Won186 billion, representing a 39% year-over-year increase and significantly exceeding the consensus estimate of Won126 billion.
UBS attributes the earnings outperformance to profitability improvements at Kakao’s subsidiaries, specifically highlighting marketing optimization at Piccoma and margin expansion at SM Entertainment.
While revenue growth remained flat in the second quarter, UBS expects growth to reaccelerate beginning in the third quarter, initially driven by subsidiaries, followed by improvements in the core advertising business in the fourth quarter following a September messenger app revamp.
The investment bank also noted Kakao’s artificial intelligence initiatives launching in the second half of 2025, which it views as providing longer-term growth potential despite the stock’s current valuation not being considered cheap.
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