Shares of Kakao, the operator of Korea's largest mobile communication app KakaoTalk, are expected to rally on the back of the firm's better-than-expected performance, industry analysts said Friday.
The shares rallied for the 10th consecutive session from Feb. 3 through Friday, gaining around 20,500 won ($17.32), or 12 percent. The shares closed at 184,500 won, up 1,000 won from the previous session.
NH Investment & Securities remained bullish on the stock, largely due to a much-anticipated upturn in the mobility business.
"Kakao Mobility will soon see its operating profit grow given the stable customer demand for the chauffeur service," NH Investment & Securities analyst Ahn Jae-min said."
"Its payment subsidiary KakaoPay is expected to inject more funding into the system thanks to the growing number of users seeking easy and convenient payment solutions not only from Korea but from Japan and Southeast Asian countries as well."
KB Securities had a similar outlook, forecasting the shares to reach 220,000 won.
"Kakao's operating profit was 79.4 billion won in the October-December period, extending the surprise earnings rally for the fourth consecutive month from the first quarter," KB Securities analyst Lee Dong-ryun said.
"The fourth-quarter figure was well above the market consensus which expected 69.3 billion won, and the expectation-exceeding performance will continue this year."
Kakao will be able to log over 3.8 trillion won in operating sales, and 408.8 in operating income by 2020, the securities firm said.
"Chatroom ads on KakaoTalk are not drawing user complaints, and the securities business will provide a major growth momentum, strong enough to offset any losses from its subsidiaries. The firm will report the strongest growth among industry peers," Lee said.
Korea Investment & Securities expects shares will jump to 205,000 won, revising its previous outlook of 195,0000 won, saying the performance will be better due to advertising income from its messaging app.
"KakaoTalk reported 221.6 billion won in operating profit in the fourth quarter. The strategy to show ads on the bottom of the chatroom has led to a marked rise in the number of hits and traffic translated into the sellers, the advertisers," a Korea Investment analyst Jung Ho-yoon said.
The rosy outlook will be further bolstered by reduced losses in the fintech business, following the takeover of a securities firm, he added.
"The acquisition of a brokerage will help the firm diversify its business portfolio, a considerable upside to be boosted further by a drop in wire service fees. The mobility sector will also be able to generate profit as related laws will be revised soon," Jung said.
The firm reported 3.89 trillion won in sales in 2019, up 29 percent from the year before.
Its operating profit stood at 206.6 billion won, up 183 percent from a year earlier.