Why investors aren’t buying GoTo’s decent Q2 results

GoTo Group’s latest quarterly results failed to resonate with investors.

The group delivered a strong operational performance in Q2 2024 on a pro forma basis, with core gross transaction value (GTV) – which excludes its merchant payment gateway services – increasing by 54% year on year to US$3.9 billion. Gross revenues rose 39% to US$262 million during the same period.

Pro forma figures take into account the deconsolidation of Tokopedia and its related delivery and fulfillment services from January 1, 2023 onwards, following the completion of its merger with TikTok Shop.

Despite that, GoTo shares fell by 3.6% to 53 Indonesian rupiah (US$0.003) in the trading day that followed the Q2 results announcement.

This was slightly above the all-time low of 50 rupiah (US$0.003) that the stock traded at through much of last month, and marked an 86% fall from the all-time high of 392 rupiah (US$0.024) in June 2022.

GoTo CEO Patrick Walujo / Photo credit: Northstar Group

“We at GoTo and I, personally, have been disappointed by the share price performance,” said CEO Patrick Walujo during the post-earnings call with analysts, adding that this “doesn’t reflect the strong performance of the underlying business.”

Focus on mass market

It’s hard to find major faults with GoTo’s latest results. Apart from the growth of GTV and gross revenue, adjusted EBITDA on a pro forma basis also improved by 95% to -US$2.9 million.

Year-on-year growth in GTV and gross revenue for its on-demand services business came in at 14.1% and 17.4%, respectively.

One area of concern is profitability for on-demand services, which include ride-hailing and food delivery. Although the adjusted earnings of US$5.5 million was the unit’s third consecutive quarter of positive earnings, it continued a downward trend from the previous quarter.

GoTo, however, appeared confident that it would achieve group EBITDA breakeven by the end of the year.

Catherine Sutjahyo, president of on-demand services, also noted that the decline in profitability was due to its focus on mass market consumers, with products like GoCar Hemat, which offers car rides at a lower price point.

While Walujo conceded that such a product mix has “lower EBITDA margins in the short term,” he added that consumers opting for cheaper services have a “higher propensity” to use other financial products from GoTo, “especially on the lending side.”

As such, management urged analysts to look at the narrowing margins in the on-demand segment more “holistically.”

No deterioration in loan portfolio

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