Kakao's stock price shows no sign of recovery

[THE INVESTOR] Kakao’s stock price closed down 1,700 won (US$1.51), or 2.1 percent, at a 52-week low of 79,300 won on Aug. 29, continuing its weeks-long losing streak on the nation’s tech-heavy stock market KOSDAQ.

Market analysts said that the tumbling stock price is due to market concerns over the disappointing performance of the firm’s online-to-offline businesses and the decreasing profits of the company’s ad business.

In the April-June period, Kakao saw its sales and operating profit increase 66.2 percent and 132.8 percent on-year, at 376.5 billion won and 26.6 billion won, respectively.

Factoring out the operating profit of music streaming service Loen Entertainment, at 20.6 billion won, the mobile messenger firm’s operating income dropped to 8.6 billion won, down 25 percent from a year earlier.

Kakao took over the music streaming service provider from mobile carrier SK Telecom in March.

The revenue of the firm’s ad business decreased 12.1 percent to 136.2 billion won.

In a bid to make up the losses in the ad business, the company has recently adopted an ad exchange platform, which helps advertisers buy and sell unsold ad space through auctions.

Some analysts, however, had skeptical views on the short-term growth of the firm.

“The short-term profit drop is inevitable for Kakao due to its decreasing ad business and new investments for the fledgling O2O businesses,” said Oh Dong-hwan, an analyst from Samsung Securities.

By Kim Young-won (wone0102@heradlcorp.com)