Big-tech platform, game stocks hit 52-week lows

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By Anna J. Park

The stock prices of Naver and Kakao, the country's two representative big-tech platform companies, have been touching their 52-week lows, with institutional investors leading the fall by dumping their shares amid recent U.S. stock market plunges.

According to the Korea Exchange (KRX), Naver fell as far as 266,500 won ($209.30) on last Thursday's trading session, reaching a new 52-week low, although the big-tech's stock price recovered a bit at Monday's closing with 277,500 won.

On a similar note for Kakao, its stock price is hovering around its new 52-week low price of 80,400 won recorded last week, despite a slight recovery to 82,900 won at Monday's closing.

Compared to their highs last summer, Naver lost nearly 43 percent of its stock value, while Kakao's stock price fell more than 54 percent. So far this year, Naver's stock price has fallen 28 percent and Kakao's has dropped 29 percent.

With the continuing downtrend of their stock prices, Naver and Kakao, which competed for the third-highest ranking on the KOSPI in terms of market cap last summer, have since dropped to sixth and 10th places, respectively. The sizes of their market caps also shrank to 45 trillion won and 36 trillion won, respectively, compared to around 64 trillion won last summer.

The big-tech firms' stock price plunges reflect the market's frozen investor sentiment toward growth stocks, due mainly to the U.S. Federal Reserve's tightened monetary policies as well as the recent fall of U.S. tech shares.

Increased social interactions, with the government's lifting of pandemic social distancing measures, also cast a shadow over the platform conglomerates' future growth potential. Naver's quarterly revenue in the first three months of this year dropped 4.3 percent from the previous quarter, with a 14.1 percent decrease quarter-on-quarter in its operating profit. Kakao also witnessed an 8 percent fall in the first quarter compared to the fourth quarter of last year.

While analysts generally view that big-tech firms' business models are still valid as they continue to achieve huge operating profits, they corrected the firms' target prices by reducing the valuation premiums attached to them.

"Market expectations still remain high that Kakao's various subsidiaries in the mobility, enterprise and entertainment sectors would keep adding corporate value to the company, yet the target price for Kakao is corrected to 125,000 won, a 17 percent downward modification, reflecting a fall in platform companies' valuation premiums," said Seo Jung-yeon, an analyst at Shinyoung Securities.

Game stocks, another main axis of the so-called growth stocks, also show a faltering movement in their prices. This year alone, major local game companies' average rates of return in their stock prices stood at minus 44.77 percent. Despite a slight recovery in the past few trading sessions, shares of major game companies such as NCSoft, Netmarble, Com2Us and Devsisters all fell to their 52-week lows earlier this month.

The growth outlook for the game sector is not bright, as more and more countries are breaking out of their previous pandemic-led lockdown policies, in addition to globally rising interest rates' adverse effects on these growth stocks. Brokerage companies' research papers have begun to make drastic cuts to the target prices of game companies that fail to meet market consensus, as clearly seen in the case of Netmarble, which posted an operating loss in the first quarter.

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