Investment In Sahabat AI Will Reduce Costs And Improve User Experience

Key Takeaways

• GoTo achieved positive adjusted EBITDA in fintech, driven by innovation and synergy, with significant expected growth in earnings and top-line revenue.
  
• Transitioning to Alibaba and Tencent cloud services and investing in AI will cut costs, enhance user experience, and improve net margins.
  
• Execution risks, competition, and macroeconomic factors may negatively impact profitability, market share, and asset quality for Gojek Tokopedia.

Catalysts

Provides and operates on-demand services in Indonesia and internationally.

• GoTo's Fintech business reached positive adjusted EBITDA one year ahead of previous guidance due to innovations like the stand-alone GoPay app and expanded consumer loan offerings, which is likely to drive further EBITDA growth in 2025. This impacts earnings and profitability positively.
  
• The company is leveraging ecosystem synergy to boost multiproduct adoption and user engagement, leading to increased usage of services and potential for top-line revenue growth, with group core GTV reaching all-time highs. This impacts revenue growth.
  
• GoTo's transition to Alibaba and Tencent cloud services promises to reduce cloud expenses by over 50% and is expected to have a significant financial impact starting in Q4 2025, improving net margins through cost savings.
  
• The company's investment in AI, particularly through Sahabat AI, aims to reduce operational costs and improve user experience, strengthening operating leverage and supporting further earnings growth.
  
• Merchant participation through funded promotions and advertising growth are enhancing profitability, as advertising revenue rose 92% year-on-year, and the expectation is for this segment to grow faster than the core food GMV, improving net margins.

GoTo Gojek Tokopedia Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming GoTo Gojek Tokopedia's revenue will grow by 14.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from -32.4% today to 6.5% in 3 years time.
• Analysts expect earnings to reach IDR 1550.2 billion (and earnings per share of IDR 1.33) by about April 2028, up from IDR -5154.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting IDR2559.0 billion in earnings, and the most bearish expecting IDR433.0 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 93.3x on those 2028 earnings, up from -16.4x today. This future PE is greater than the current PE for the ID Multiline Retail industry at 11.4x.
• Analysts expect the number of shares outstanding to decline by 1.68% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 14.47%, as per the Simply Wall St company report.

GoTo Gojek Tokopedia Future Earnings Per Share Growth

Risks

• The deconsolidation of Tokopedia and GoTo Logistics could impact overall group revenue and profitability metrics, given the significant part of the ecosystem these segments represent.
  
• Increasing competition in the Indonesian market for on-demand services could pressure Gojek Tokopedia's market share and impact revenue growth.
  
• The potential adverse effects of global macroeconomic conditions on consumer spending in Indonesia may negatively affect revenue, especially in segments like consumer loans and on-demand services.
  
• Execution risks related to achieving ambitious profitability targets and maintaining market leadership amidst intense competition could impact net margins and earnings.
  
• Concerns about asset quality and the macroeconomic environment may affect the growth and profitability of the Fintech loan book, potentially impacting net earnings.

Valuation

• The analysts have a consensus price target of IDR96.0 for GoTo Gojek Tokopedia based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of IDR125.0, and the most bearish reporting a price target of just IDR68.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be IDR23794.9 billion, earnings will come to IDR1550.2 billion, and it would be trading on a PE ratio of 93.3x, assuming you use a discount rate of 14.5%.
• Given the current share price of IDR80.0, the analyst price target of IDR96.0 is 16.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.