Premium Services And AI Integration Will Empower Future Success

Key Takeaways

• Focusing on high-spending users and expanding premium services is expected to enhance net margins and drive revenue growth.
  
• Leveraging AI for operational efficiencies aims to reduce expenses and potentially increase net margins over time.
  
• Increased market volatility, asset quality concerns, and dependency on Bank Jago pose risks to growth, profitability, and revenue stability for GoTo Gojek Tokopedia.

Catalysts

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

• GoTo's strategy of refining product offerings and incentive spending is expected to sustain growth, particularly by focusing on high-spending users and expanding premium services. This should enhance net margins and revenue growth.
  
• The continued growth and profitability in the On-Demand Services segment, especially through targeted upselling and efficient incentive allocation, signal potential for improving net margins and overall profitability.
  
• In the FinTech segment, the emphasis on prudent risk management and data-driven lending innovations are expected to drive future revenue growth, particularly as the loan book grows and consumer engagement increases.
  
• The integration of advertising improvements and expanded analytics capabilities are anticipated to grow revenue by driving increased demand from merchants and enhancing overall margins.
  
• The Group's focus on leveraging AI through Sahabat-AI for operational efficiencies and cost reductions positions the company to reduce operating expenses and potentially increase net margins over the long term.

GoTo Gojek Tokopedia Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming GoTo Gojek Tokopedia's revenue will grow by 14.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from -32.4% today to 6.3% in 3 years time.
• Analysts expect earnings to reach IDR 1509.1 billion (and earnings per share of IDR 1.32) by about May 2028, up from IDR -5154.9 billion today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting IDR2574.6 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 96.0x on those 2028 earnings, up from -17.4x today. This future PE is greater than the current PE for the ID Multiline Retail industry at 11.7x.
• 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 14.51%, as per the Simply Wall St company report.

GoTo Gojek Tokopedia Future Earnings Per Share Growth

Risks

• Increased global financial market volatility, along with potential global tariffs and localized demand pressures, pose risks to the company's future growth and profitability, particularly affecting net revenue and adjusted EBITDA forecasts.
  
• The company expressed concerns over managing asset quality within their growing consumer loan segment, amid the current global economic environment; this may impact net margins and revenue stability.
  
• As noted, although the premium services have grown, there is caution around market demand, especially in the event of down-trading by consumers which could squeeze revenue growth in on-demand services.
  
• The reliance on Bank Jago for a significant portion (around 70%) of their loan book funding highlights potential vulnerabilities in credit supply, influencing earnings if there any changes in partnership terms or economic conditions affecting bank interactions.
  
• Fluctuations in currency, particularly the depreciation of the Indonesian Rupiah, could lead to realized foreign exchange gains that will no longer be reflected in adjusted EBITDA but may obscure true operational performance if continued in the long-term.

Valuation

• The analysts have a consensus price target of IDR96.08 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 IDR24039.7 billion, earnings will come to IDR1509.1 billion, and it would be trading on a PE ratio of 96.0x, assuming you use a discount rate of 14.5%.
  
• Given the current share price of IDR85.0, the analyst price target of IDR96.08 is 11.5% 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.