UBS is bullish on GoTo Group and changes its 12-month rating on the Indonesian e-commerce and car-calling giant from “sell” to “buy”. Shares of GoTo jumped as much as 33% in Tuesday trading after the Swiss investment bank doubled shares. GoTo is an amalgamated entity of the two largest Indonesian technology companies Gojek and Tokopedia. This is why UBS upgraded the stock. In September, GoTo’s on-demand services, including ride-hailing and food delivery, achieved a positive contribution margin, several months ahead of schedule. Contribution margin measures profitability by showing total available revenue after deducting variable costs. UBS said in its report that despite the subsidy cuts and difficult macro conditions, GoTo still posted quarterly growth in key segments. On-demand services posted 5% quarterly growth, while e-commerce grew 3.8%. According to UBS, Tokopedia has outpaced its peers with a roughly 20% year-over-year increase in monthly active users indexed during major shopping festivals in 2022, compared with competitors Shopee at 10% and Lazada with MAU at 3%. We believe profit margins can surprise positively by improving competitive dynamics and streamlining costs. UBS However, UBS lowered its 12-month price target for GoTo by 33% to 160 rupiah, from its previous target of 240 rupiah. That’s an increase of about 60% after yesterday’s strong rally. The bank estimates a lower transaction value from 2023 to the end of 2024 and a decrease in revenue due to reduced incentives and difficult macro conditions. However, despite these headwinds, the underlying penetration of both food delivery and e-commerce in Indonesia remains low – which means there is still room for growth, the report said. added that the ride-hailing service is also on the way to recovering from Covid. “While there are still concerns about a slowdown in 2023, we expect GoTo to increase gross merchandise value at 16% with earnings adjusted before interest, taxes, depreciation and amortization. EBITDA) turned positive in the first half of 2025, compared to the previous fourth quarter of 2025.” EBITDA is a measure of a company’s financial health. UBS further notes that the likes of GoTo, Sea Limited and Grab have been cutting incentives and costs to accelerate the path to profitability. For Q3 2022, GoTo reported a smaller adjusted EBITDA loss of 3.7 trillion rupiah (about $235 million) compared with a year ago. “We believe margins can surprise positively due to improved competitive dynamics and cost rationalization.” The bank has narrowed its GoTo estimate for a loss from 2023 to the end of 2024 from 12% to 20%. It also yields the team contribution margin and adjusted EBITDA breakeven from the first quarter of 2024 and the fourth quarter of 2025, to the third quarter of 2023 and the first half of 2025, respectively. The company’s shares have plummeted as much as 51 percent in the past month and more than 70 percent year-to-date, as setbacks include nine-month-long losses and pre-IPO shareholders opting out of the IPO. secondary offering after the close. expired. A lock-in period is a contract clause that prevents insiders from buying back or selling shares for a period of time after the company goes public. “Lockdown expiration and steady progress toward profitability by the end of 2023 should help the stock bounce back, in our view,” the UBS report said.