GoTo Earnings: Margins Significantly Improving, but Long-Term Growth Trajectory in Question

We are maintaining our IDR 75 fair value estimate for GoTo after the company reported significant improvement in operating losses in its second quarter, offset by a 5% gross transactional value decline year on year, which highlights our main concern. E-commerce and on-demand service GTV declined 13% and 11%, respectively, bringing into question GoTo’s long-term revenue growth trajectory. The year-on-year declines worsened for both businesses from last quarter, and there is increasing uncertainty about where future GTV growth can come from, given increasing competition in the region, as indicated by GoTo management and peers. We believe that the stock is already overvalued as we reiterate our view that GoTo will be challenged to achieve profitability and reaccelerate GTV growth at the same time.