Kakao splits off AI unit, but brokerages slash price targets as payoff seen years away

Kakao plans to spin off its AI business through a corporate split in January, but brokerages have already begun lowering their price targets on the stock. While the separation gives the AI unit a chance to be valued on its own growth merits, analysts say monetization has yet to be proven — and concerns are mounting that the remaining entity, Kakao X, will trade at a discount given its holding-company structure centered on subsidiaries and investment assets.

According to FnGuide, five brokerages — Daol Investment & Securities, Meritz Securities, Samsung Securities, Kiwoom Securities and Hana Securities — all cut their price targets for Kakao on Monday. Kiwoom Securities made the steepest reduction, slashing its target by 36.4% to 70,000 won ($52) from 110,000 won. Meritz Securities trimmed its target by 28.8%, Daol Investment & Securities by 25.0%, Samsung Securities by 18.4% and Hana Securities by 13.8%. Samsung Securities and Meritz Securities also downgraded their investment opinions from buy to hold.

The revised targets reflect recalculations of Kakao's fair value in light of the planned January split. Under the structure, Kakao AI will be a growth company generating new revenue from AI, advertising and commerce built on the KakaoTalk platform, while Kakao X will be valued primarily through its stakes in major subsidiaries and its investment portfolio. Specifically, KakaoTalk, AI, advertising and commerce will sit under Kakao AI, while tech-fin, content, mobility, key subsidiary stakes and investment operations will go to Kakao X. The split ratio is set at 36.49% for Kakao AI and 63.51% for Kakao X.

Existing shareholders will receive shares in both Kakao AI and Kakao X after the split. Whether the combined value of those two holdings will exceed the current share price is a separate question, however. If AI generates meaningful new growth, the split could prove beneficial — but if Kakao X attracts a discount, the combined value could end up lower than today's.

Brokerages are divided on how to value the two entities after the split. Hana Securities put Kakao AI's enterprise value at 12.5 trillion won, higher than its 10.4 trillion won estimate for Kakao X. Samsung Securities took the opposite view, valuing Kakao AI at 7 trillion won and Kakao X at 10.8 trillion won, while Meritz Securities placed Kakao AI at around 6 trillion won. The gap in AI valuations across brokerages reaches roughly 6.5 trillion won.

The time needed to validate the AI business's growth potential has reinforced a cautious industry outlook. Kakao has set 2030 targets for Kakao AI of more than 6 trillion won in sales, more than 1 trillion won in AI revenue, and 2 trillion won in EBITDA (earnings before interest, taxes, depreciation and amortization). Lee Jun-ho, an analyst at Hana Securities, said the AI growth story is expected to show up in the numbers from 2028, adding that a conservative approach is warranted in the near term given the lack of clear rerating catalysts beyond gains in listed subsidiary valuations.

Analysts also note that becoming an independent entity alone is not enough to justify a high growth-stock premium for the AI business. Oh Dong-hwan, an analyst at Samsung Securities, said Kakao AI still faces low market valuations for AI services and will find it difficult to command a valuation premium over global peers. He added that it will be necessary to track whether AI search, agentic advertising, commerce and subscription services translate into improvements in advertising efficiency, purchase conversion rates and average revenue per user.

The outlook for Kakao X — the entity left behind after the AI unit is carved out — is also broadly cautious. While separating the subsidiary stakes and investment assets creates an opportunity to enhance their value through dedicated management, analysts say the removal of Kakao's core operating businesses strengthens a structure in which the value of held assets drives the share price, raising the risk of a discount. Oh said Kakao X's character as a pure investment holding company will become more pronounced, which could intensify the holding-company discount.