J.P. Morgan Pours Cold Water on 'Kakao Rally'..."Stock Price Difficult to Justify"

Regarding the recent surge in Kakao Group stocks, the foreign investment bank (IB) J.P. Morgan downgraded the rally, calling it "a stock price surge that is difficult to justify."

According to the Korea Exchange on the 10th, KakaoPay's share price soared by 95.24% over the past month. During the same period, Kakao rose by 35.32%, and KakaoBank increased by 24.89%.

The recent sharp rise in Kakao Group shares, led by KakaoPay, resulted from growing expectations that discussions on the introduction of a won-based stablecoin would accelerate following the launch of the Lee Jae-myung administration. The outlook is that KakaoPay, Toss, and other digital payment platforms would benefit if a won-based stablecoin is implemented. The stock rally gained momentum when Kim Yong-beom, who has advocated for the need to introduce a won-based stablecoin and is a former First Vice Minister of the Ministry of Economy and Finance, was appointed as the first Policy Chief of the presidential office on the 6th.

However, J.P. Morgan pointed out on this day that "it is fundamentally difficult to justify KakaoPay's sharp rise." J.P. Morgan commented, "It is premature to designate KakaoPay as the main beneficiary of stablecoin policies based on the won," and added, "There remains significant uncertainty regarding the introduction of stablecoins."

They also analyzed that the effects of the local currency voucher policy would be limited. J.P. Morgan said, "Policies to stimulate consumption through local currency are one-off," and projected, "This would only increase KakaoPay's operating profit by around ₩3 billion this year." For a company with a market capitalization of ₩6.7 trillion, this is not a meaningful level.

J.P. Morgan criticized, "The recent rally in Kakao Group shares is similar to the end of 2022 and early 2023, when there was a surge purely on expectation rather than performance." Along with this, it presented an underweight investment rating on KakaoPay and a neutral view on KakaoBank and Kakao.

Nevertheless, despite such criticism, KakaoPay jumped by 15.96% on the day to close at ₩57,400. Kakao and KakaoBank each fell by 2.72% and 2.74%, respectively.

Written by Sungmi Shim