GoTo Earnings: Profitability Improves, but Is Overshadowed by Major Risk to Long-Term Growth

We maintain our fair value estimate of IDR 75 for GoTo after it reported first-quarter 2023 results that showed profitability improvement offset by worse-than-expected gross transactional volume, or GTV, decline. The company reported IDR 3.32 trillion in revenue, which increased 120% year on year and in line with our estimate of IDR 3.28 trillion. The increase was due to the reduction of subsidies and growth in its financial services. While the revenue growth is encouraging, the long-term GTV growth and profitability for e-commerce remain the key valuation drivers and we are uncertain if GoTo can balance both. The first-quarter operating loss was IDR 4.1 trillion compared with last year’s loss of IDR 7.8 trillion. While profitability improved, a further significant reduction of operating expenses is required which should force GoTo to run at lean levels.