Rakuten Earnings: Mobile Woes Remain, but Strong Ecosystem Weathers the Storm, Maintaining Valuation

We have mixed opinions about Rakuten’s March-quarter results. On one hand, we are encouraged by solid growth in both the fintech and internet service segments, which demonstrates the strength of Rakuten’s ecosystem. On the other hand, Rakuten mobile’s non-GAAP EBITDA loss of JPY 33.5 billion worsened by about JPY 4 billion from the December-quarter’s EBITDA loss of JPY 29.5 billion, due to heavier selling, general, and administrative costs with the launch of the “SAIKYO FAMILY Program.” We maintain our fair value estimate of JPY 780, as the improved outlook for the fintech segment is offset by heavier operating costs in the mobile segment in the next five years, to maintain high subscription growth. We think shares are currently fairly valued.