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LY Corporation (JP:4689)
:4689
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LY Corporation
(4689)
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Rating:74Outperform
Price Target:
¥466.00
▲(11.70% Upside)
The score is driven primarily by solid financial performance (strong margins and a stable balance sheet), supported by a reasonable valuation. Earnings call factors are constructive (double-digit EBITDA growth and strong PayPay momentum, plus a higher dividend), but ongoing search advertising weakness, rising AI-related costs, and the ASKUL ransomware incident add execution and risk overhang. Technically, the stock lacks clear upside momentum, with price below key longer-term moving averages and a negative MACD.
Positive Factors
High profitability and margin sustainability
Consistently high gross margins (>70%) and a healthy TTM net margin indicate durable pricing power and efficient cost structure across product lines. This margin base supports reinvestment in R&D, funds dividend policy and cushions the firm against cyclical revenue swings over the medium term.
Rapid, high‑margin growth in payments (PayPay)
Strong PayPay expansion diversifies LY's revenue mix into higher‑growth, higher‑margin financial services. Sustained payments growth enhances recurring transaction revenues, cross‑sell opportunities into commerce, and improves overall cash generation potential independently of ad cycles.
Solid balance sheet and improving ROE
Moderate leverage and an improving ROE signal prudent capital management and rising capital efficiency. This financial flexibility supports strategic investments, share actions and buffers against downturns, enabling multi‑year execution on AI, MINI Apps and payments initiatives without excessive refinancing risk.
Negative Factors
Persistent search advertising weakness
Structural softness in search ads reduces a core monetization stream and directly pressures media revenues and segment margins. If AI‑driven search shifts advertiser demand, the company faces durable top‑line risk until monetization and product adjustments offset lost ad spend.
Rising LLM/AI costs eroding planned savings
Material and growing AI/LLM expenses will offset fixed‑cost reductions and compress operating leverage. Without clear, timely monetization of AI products, these recurring platform costs can weigh on margins and cash flow for multiple years as the company scales agentization and related services.
Operational and reputational risk from ransomware incident
A material security breach creates persistent operational, legal and reputational risks that can disrupt commerce and enterprise relationships. Remediation, compliance costs and potential loss of customer trust may require lasting investment in cybersecurity and divert management focus from growth initiatives.
LY Corporation (4689) vs. iShares MSCI Japan ETF (EWJ)
Market Cap
¥2.72T
Dividend Yield1.69%
Average Volume (3M)15.02M
Price to Earnings (P/E)13.8
Beta (1Y)0.16
Revenue Growth6.39%
EPS Growth105.16%
CountryJP
Employees28,196
SectorConsumer Cyclical
Sector Strength84
IndustryInternet Content & Information
Share Statistics
EPS (TTM)12.93
Shares Outstanding6,882,399,000
10 Day Avg. Volume17,618,049
30 Day Avg. Volume15,020,503
Financial Highlights & Ratios
PEG Ratio0.62
Price to Book (P/B)1.23
Price to Sales (P/S)1.93
P/FCF Ratio8.81
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price TargetN/A
Price Target UpsideN/A
Rating ConsensusN/A
Number of Analyst Covering0
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
LY Corporation Business Overview & Revenue Model
Company DescriptionLY Corp. engages in the management of group companies and related operations. It operates through the following segments: Media and Commerce. The Media segment covers the advertisement related services that include search linked advertisement and display advertisement. The Commerce segment handles the commerce related services in Yahoo Auction!, Yahoo! Shopping, ASKUL Corp., and Yahoo! Premium. It also provides the settlement finance related services. The company was founded on January 31, 1996 and is headquartered in Tokyo, Japan.
How the Company Makes MoneyLY Corporation generates revenue through multiple streams, primarily by selling its electronic components and systems to various industries, including telecommunications, automotive, and consumer electronics. The company benefits from long-term contracts with major manufacturers, ensuring a steady flow of income. Additionally, LY Corporation engages in research and development partnerships that enhance its product offerings and market reach. The company also capitalizes on emerging technologies, such as IoT and smart devices, which have increased demand for its products, thereby contributing significantly to its overall earnings.
LY Corporation Earnings Call Summary
Earnings Call Date:Nov 04, 2025
(Q2-2025)
| % Change Since: |
Next Earnings Date:Feb 04, 2026
Earnings Call Sentiment Positive
The call presented a predominantly positive operational and financial picture: solid consolidated revenue growth (+9.4% Y‑o‑Y) and double‑digit adjusted EBITDA growth (+11.3% Y‑o‑Y), very strong expansion in strategic payments/financial services (PayPay: revenue +35%, EBITDA +52.1%), e‑commerce GMV gains, dividends raised and clear strategic initiatives around AI agentization and Official Accounts/MINI Apps. However, material near‑term challenges remain—chiefly persistent search advertising weakness with H2 downside risk, a ransomware incident at a group company, and rising LLM/AI costs that partially offset planned cost savings. Management provided a credible roadmap (product revamps, MINI Apps momentum, SaaS plans) but execution and GenAI monetization risks create uncertainty. Overall, the positives (broad growth drivers and profitability improvements) outweigh the negatives, while recognizing execution and security risks that require monitoring.Q2-2025 Updates
Positive Updates
Consolidated Revenue Growth
Consolidated revenue of JPY 505.7 billion, up 9.4% year‑on‑year, demonstrating top‑line recovery and scale.
Adjusted EBITDA and Margin Improvement
Consolidated adjusted EBITDA rose 11.3% Y‑o‑Y to JPY 125.4 billion with improved margin; adjusted EBITDA and EPS remained on track with guidance despite revenue miss.
Strong Performance in Strategic Businesses (PayPay & Financial Services)
Strategic businesses driven by PayPay consolidated achieved revenue of JPY 109.7 billion, up 35% Y‑o‑Y; adjusted EBITDA JPY 22.9 billion, up 52.1% Y‑o‑Y, with high margins. Management noted consolidated PayPay sales grew ~30.4% and consolidated EBITDA more than doubled.
Commerce Business Growth and GMV Momentum
Commerce revenue for Q2 was JPY 216.6 billion, up 7.2% Y‑o‑Y. Domestic shopping transaction value grew 13.1% Y‑o‑Y and Reuse transaction value grew 15.7% Y‑o‑Y, supported by Yahoo! market strength and BEENOS consolidation.
Consolidation Contributions
Full consolidation of BEENOS and LINE Bank Taiwan from Q2 contributed approximately JPY 900 million to consolidated adjusted EBITDA and supported revenue expansion.
Dividend Upside from Buyback/Cancellation
Completed share repurchase and cancellation; annual dividend revised upward from JPY 7.0 to JPY 7.3 due to reduced share count.
Progress on Product Revamp and Mini Apps
LINE app renewals rolled out (talk, shopping, wallet tabs) with Home tab test release scheduled this year. MINI Apps adoption showed recent growth: number of apps increased 1.5x and users increased 1.6x; Official Accounts base in Japan: 1.3M active, 310k paid accounts.
Clear Strategic Roadmap (AI Agentization & OA/MINI Apps)
Management articulated a two‑pronged growth strategy: agentization of services with AI (goal: daily AI agent use by 100M users) and expansion/monetization of Official Accounts and MINI Apps, targeting doubling OA/MINI Apps related sales from JPY 140bn to JPY 280bn in three years.
Cost Optimization Target
Plan to reallocate human resources to growth areas and reduce fixed costs by JPY 15 billion by end of FY2026 to build a leaner financial structure.
Negative Updates
Search Advertising Weakness and Guidance Risk
Search advertising declined and caused consolidated revenue to be slightly behind guidance. Q2 search ad softness worsened vs Q1 due to major client budget cuts and reductions from large EC and vertical clients; management expects similar negativity in Q3/Q4.
Media Business Revenue and EBITDA Decline
Media segment reported declines in both revenue and adjusted EBITDA for Q2 as search advertising contracted; while cost savings improved Q‑on‑Q margins, the segment is under pressure structurally.
One‑off Promotional Drag on Commerce Profitability
Commerce adjusted EBITDA declined to JPY 33.3 billion in Q2 due to elevated promotional expenses tied to hometown tax donation program (front‑loaded demand), which may cause slower growth in H2 as the effect reverses.
Ransomware Incident and Data Leak at ASKUL
A ransomware attack on group company ASKUL (Oct 19) caused system failures and partial data leakage; investigation and remediation are ongoing—raising operational, security and reputational risks.
Rising LLM/AI Costs Partially Offsetting Savings
Management expects LLM/AI costs (JPY 10 billion this fiscal year with further increases) that will offset part of efficiency gains; the JPY 15 billion fixed cost reduction target must contend with rising AI commissions and other cost pressures.
Uncertainty Around GenAI Impact on Search Ads
10% of Yahoo! search queries reportedly come from AI search; while near‑term ad revenue impact deemed limited, management acknowledges mid‑to‑long‑term risk and ongoing uncertainty about how GenAI will change advertiser demand and monetization.
Execution Risks on Ambitious OA/MINI Apps Targets
Doubling OA/MINI Apps related sales from JPY 140bn to JPY 280bn within three years is ambitious and depends on successful scaling and monetization (e.g., SaaS launches planned from H1 2026), plus increased sales capability and investments; management admitted monetization mainly from next fiscal year onward.
Revenue Slightly Missed Guidance
Although EBITDA and EPS in line, consolidated revenue was slightly below guidance, driven by the search advertising shortfall.
Company Guidance
LY Corporation guided that Q2 FY2025 results showed consolidated revenue of JPY 505.7 billion (+9.4% Y/Y) and adjusted EBITDA of JPY 125.4 billion (+11.3% Y/Y, up JPY 11.7 billion), with total ad revenue +2.4% and commerce advertising in double‑digit growth; commerce revenue was JPY 216.6 billion (+7.2% Y/Y) with adjusted EBITDA JPY 33.3 billion, domestic shopping GMV +13.1% and Reuse +15.7% (BEENOS and LINE Bank Taiwan were fully consolidated in Q2 and together added JPY 0.9 billion to adjusted EBITDA). PayPay consolidated revenue reached JPY 109.7 billion (+35% Y/Y) with adjusted EBITDA JPY 22.9 billion (+52.1%), and management said PayPay‑related sales rose ~30.4% with EBITDA more than doubled; search advertising weakness is expected to persist in H2 at Q2 levels while AI search accounts for ~10% of queries. Strategic targets include doubling OA/MINI Apps revenue from JPY 140 billion to JPY 280 billion over three years, growing paid Official Accounts (currently 310k paid, 1.3m active in Japan) toward a 5m opportunity, expanding AI agent DAU from ~8.6m (Oct) toward 100m, reallocating 50% of headcount to growth areas by FY2028, reducing fixed costs by JPY 15 billion by FY2026 (company stand‑alone fixed cost ~JPY 400–500 billion), absorbing LLM costs of about JPY 10 billion this fiscal year, and raising the annual dividend to JPY 7.3 after share cancellations.LY Corporation Financial Statement Overview
Summary
Strong profitability profile (gross margin consistently above 70% and TTM net margin 7.75%) and solid balance sheet structure (moderate debt-to-equity of 0.68; improving ROE to 6.93%). Offsetting factors include slightly weaker EBIT margin versus last annual report and declining TTM free cash flow growth (-2.67%) with weaker cash conversion.Income Statement
LY Corporation shows strong revenue growth with a TTM increase of 2.24% and consistent gross profit margins above 70%. The net profit margin is healthy at 7.75% for TTM, indicating effective cost management. However, the EBIT margin has slightly decreased in the TTM compared to the previous annual report, suggesting potential pressure on operating efficiency.85
Very Positive
Balance Sheet
The company maintains a moderate debt-to-equity ratio of 0.68 in TTM, reflecting a balanced approach to leverage. Return on equity has improved to 6.93% in TTM, showcasing better profitability from shareholders' equity. The equity ratio remains strong, indicating a solid capital structure, although the increase in total debt warrants monitoring.78
Positive
Cash Flow
Operating cash flow remains robust, but free cash flow has shown a decline in TTM, with a negative growth rate of -2.67%. The operating cash flow to net income ratio is relatively low, suggesting potential challenges in converting income into cash flow. However, the free cash flow to net income ratio remains strong, indicating efficient cash management.72
Positive
| Breakdown | TTM | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.99T | 1.92T | 1.81T | 1.67T | 1.57T | 1.21T |
| Gross Profit | 1.45T | 1.39T | 1.29T | 1.16T | 1.07T | 773.40B |
| EBITDA | 482.94B | 444.44B | 361.30B | 428.54B | 337.77B | 267.45B |
| Net Income | 204.52B | 153.47B | 113.20B | 178.87B | 77.32B | 70.14B |
Balance Sheet | ||||||
| Total Assets | 10.47T | 9.16T | 9.04T | 8.59T | 7.11T | 6.70T |
| Cash, Cash Equivalents and Short-Term Investments | 1.04T | 1.04T | 1.42T | 1.65T | 1.13T | 1.07T |
| Total Debt | 1.96T | 1.69T | 1.88T | 1.91T | 1.67T | 1.39T |
| Total Liabilities | 6.96T | 5.74T | 5.60T | 5.27T | 4.13T | 3.71T |
| Stockholders Equity | 2.91T | 3.00T | 3.04T | 2.92T | 2.68T | 2.68T |
Cash Flow | ||||||
| Free Cash Flow | 441.89B | 419.85B | 245.47B | -55.94B | -6.32B | 137.18B |
| Operating Cash Flow | 483.81B | 519.59B | 316.48B | 93.05B | 266.31B | 207.92B |
| Investing Cash Flow | -498.07B | -485.28B | -444.06B | 319.79B | -303.90B | -12.35B |
| Financing Cash Flow | -152.87B | -437.15B | -110.80B | 105.79B | 91.63B | -12.07B |
LY Corporation Technical Analysis
Negative
417.20
Price Trends
418.55
Negative
442.66
Negative
483.25
Negative
Market Momentum
-2.23
Positive
34.61
Neutral
9.63
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4689, the sentiment is Negative. The current price of 417.2 is above the 20-day moving average (MA) of 415.94, below the 50-day MA of 418.55, and below the 200-day MA of 483.25, indicating a bearish trend. The MACD of -2.23 indicates Positive momentum. The RSI at 34.61 is Neutral, neither overbought nor oversold. The STOCH value of 9.63 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for JP:4689.
LY Corporation Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | ¥61.46B | 23.80 | ― | 0.90% | 30.25% | 67.87% | |
74 Outperform | ¥2.72T | 13.82 | ― | 1.69% | 6.39% | 105.16% | |
74 Outperform | ¥92.86B | 24.90 | ― | 2.17% | 5.17% | 52.84% | |
73 Outperform | ¥384.67B | 22.01 | ― | ― | 23.28% | 26.56% | |
66 Neutral | ¥451.39B | 22.94 | 33.08% | 3.62% | 20.98% | 0.48% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% |
* Consumer Cyclical Sector Average
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LY Corporation Corporate Events
LY Corporation to Absorb LINE Pay Unit After Ending Japan Payment Service
Dec 23, 2025
LY Corporation will absorb its wholly owned subsidiary LINE Pay Corporation through a simplified absorption-type merger effective March 31, 2026, following the termination in April 2025 of the LINE Pay mobile money transfer and payment service in Japan. The move is aimed at streamlining the group’s management structure and reallocating resources within its financial operations by dissolving the now redundant payments subsidiary without issuing new shares or cash, reflecting a strategic retreat from that specific payment service while seeking greater group synergies and operational efficiency.
The most recent analyst rating on (JP:4689) stock is a Hold with a Yen439.00 price target. To see the full list of analyst forecasts on LY Corporation stock, see the JP:4689 Stock Forecast page.
LY Corporation Chairperson Kentaro Kawabe to Retire at June 2026 Shareholders Meeting
Dec 23, 2025
LY Corporation announced that Chairperson and Representative Director Kentaro Kawabe will retire from his director position when his term ends at the conclusion of the company’s 31st Ordinary General Meeting of Shareholders scheduled for June 2026, following his own request to step down, which the board has accepted. The company said its Nominating and Remuneration Committee and Board of Directors will now deliberate the future board structure, with details to be disclosed later, signaling a forthcoming leadership transition that could influence corporate governance and strategic direction but with succession plans still to be finalized.
The most recent analyst rating on (JP:4689) stock is a Hold with a Yen439.00 price target. To see the full list of analyst forecasts on LY Corporation stock, see the JP:4689 Stock Forecast page.
LY Corporation Reports Robust Financial Growth and Strategic Consolidation Changes
Nov 4, 2025
LY Corporation reported strong financial results for the six months ended September 30, 2025, with significant year-on-year growth in revenue, operating income, and net income. The company also announced changes in its consolidation scope, adding five new entities and excluding one, which may impact its future financial performance and market positioning.
The most recent analyst rating on (JP:4689) stock is a Hold with a Yen476.00 price target. To see the full list of analyst forecasts on LY Corporation stock, see the JP:4689 Stock Forecast page.
LY Corporation Revises Dividend Forecast Amid Strategic Capital Moves
Nov 4, 2025
LY Corporation has revised its dividend forecast for the fiscal year ending March 31, 2026, increasing the year-end dividend per share from JPY7.00 to JPY7.30. This decision follows a decrease in the number of shares eligible for dividends due to share repurchases. The company aims to enhance shareholder returns and capital efficiency through stable dividends and strategic capital allocation, including share buybacks and potential M&A activities.
The most recent analyst rating on (JP:4689) stock is a Hold with a Yen476.00 price target. To see the full list of analyst forecasts on LY Corporation stock, see the JP:4689 Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.