Naver Earnings: Strong Profit, but E-Commerce Competition Ramping Up; Fair Value Down to KRW 255,000

Naver reported fourth-quarter 2023 revenue growth of 11.7% with operating profit up 20.5% year on year to another quarterly record of KRW 406 billion, which is slightly better than our expectations. Excluding the effects of accounting changes from gross to net revenue in commerce, financial technology, and Webtoon as well as the acquisition of Poshmark, fourth-quarter revenue was up 8.3% year on year and 2023 revenue was up 11.8%. The key drivers of fourth-quarter operating profit growth were the search and e-commerce businesses, which increased operating profit by KRW 69 billion or 16% year on year and the content business, which reduced its operating loss by KRW 46 billion to KRW 32 billion. Cost efficiencies in both segments were key to the improved operating profit, but reduced depreciation also played a part. The company increased its average depreciation life span to five years from four years previously, which we estimate added around KRW 15 billion or 4% to quarterly operating profit. The Poshmark acquisition was completed as of Jan. 5, 2023, which added to revenue growth and although it was EBITDA-positive, its operating profit was not disclosed.