Kiwoom Securities “Software industry is in crisis… We need to cooperate with global AI companies”

(Seoul = Yonhap News) Reporter Kim Yu-hyang = Kiwoom Securities diagnosed the situation as a crisis in which domestic Internet and platform companies are not engaging in close cooperation with leading global artificial intelligence (AI) companies, and downgraded its investment opinion on the industry from 'overweight' to 'neutral'.

Researcher Kim Jin-gu said in the report that day, “We conclude that the lack of strong integration with frontier companies is a crisis in the domestic software industry.”

He said, "We must not forget that in the AI ​​(artificial intelligence) era, a high economic moat can be achieved through the expression of value based on large language models (LLM) such as Frontier Backbone."

He also predicted, “We are concerned that major domestic software companies are not partnering with frontier companies using user data, but are using this as a weapon to respond defensively to the strategies of frontier companies,” and predicted, “Legacy companies that do not form a strong alliance with frontier companies this year will witness a decrease in valuation next year.”

In particular, he cautioned, “It is expected that major frontier companies will secure complex public user data next year, which will have an impact on the advertising and commerce areas where domestic software companies have enjoyed cash cows through user attribution.” He cautioned, “This could act as a crisis and potential risk for the domestic software industry.”

Researcher Kim also lowered the target stock prices for Naver [035420], Kakao [035720], and Kakao Pay [377300].

He said that among Naver's valuations, the potential PER (price-to-earnings ratio) of the commerce business was adjusted downward. At the same time, the target price was lowered from 320,000 won to 250,000 won.

Regarding Kakao, he said, "Last year, we showed expectations of a strong combination with Open AI, but this year's actions have not yet matched that," and lowered our target price from 70,000 won to 44,000 won, saying, "It is difficult to expect synergy effects due to the recent split decision."

Researcher Kim also lowered the target for Kakao Pay from 85,000 won to 55,000 won. However, the investment opinion on these stocks was all maintained at 'buy'.