Indonesian software-as-a-service and cloud provider GoTo's share price jumped this week after positive broker ratings, ending a months-long downward trend since the company's April initial public offering. But the stock has since fallen back despite multiple upgrades.
- GoTo's share price jumps following positive broker ratings from UBS and BNI Securities.
- Software-as-a-service firms have recently experienced high levels of growth, boosted by a rise in home working. Inflation has seen the industry suffer this year.
- The Wisdomtree Cloud Computing ETF offers investors exposure to the industry.
GoTo's [GOTO] share price jumped 24% in early trading on 13 December after analysts at UBS and BNI Securities upgraded their ratings to buy.
The company's "premium versus peers has narrowed, making valuations attractive." At the same time, "steady progress toward profitability should help the stock re-rate," providing investors with renewed confidence in the stock, said UBS analyst Navin Killa.
The jump reversed 16 straight sessions of decline after the company reported a significant expansion in the business' nine-month losses year-on-year to 20.32trn rupiah.
However, the stock has since fallen below the 100 rupiah mark, despite multiple brokers upgrading their ratings. The expiration of a lock-up period for investors involved in the IPO may have contributed to this, allowing them to reduce their holdings.
Longer term, the stock price has been in a months-long downward trend since the company's April IPO.
GoTo boosts transaction volume
GoTo has set out cost-cutting measures, including announcing that it plans to lay off around 12% of its staff, with the loss of around 1,300 jobs.
CEO Andre Soelistyo is hoping the business can improve results, highlighting how the company posted a "particularly strong performance on accelerating our path to profitability."
There was some optimism in the third-quarter earnings, as revenue for the period grew by 30% year-on-year, while gross transaction volume also jumped. The business also achieved growth in its on-demand services in September, which was ahead of schedule.
Southeast Asian tech stock struggle
More widely, GoTo is one of three of Southeast Asia's high-profile tech companies that have seen a combined $51bn wiped off their value in the last 18 months.
Grab Holdings [GRAB], PT Bukalapak.com [BUKA.JK] and GoTo had experienced heightened attention as growth stocks that might offer exposure to Southeast Asia's flourishing e-commerce sector at a time when the SaaS industry was booming, boosted by home-working trends in recent years.
However, biting inflation coupled with rising interest rates has dampened investors' confidence and hit lofty valuations. Shares of leading players such as Salesforce [CRM] and Microsoft [MSFT] are down significantly this year -- by 49.5% and 26.6% year-to-date, respectively.
Funds in focus: Wisdomtree Cloud Computing ETF
As macroeconomic headwinds depress global markets this year, demand for the services of the SaaS sector is expected to grow, and several ETFs offer exposure to the industry.
One example is the Wisdomtree Cloud Computing ETF [WCLD], which concentrates on emerging US companies focused on cloud software and services, including firms such as Wix.com [WIX] and Shopify [SHOP]. The ETF is down 50.35% in 2022.
Another fund offering investors exposure to SaaS is the Global X Cloud Computing ETF [CLOU]. The fund seeks to invest in companies that are set to benefit from the increased adoption of cloud technology. Its top holdings include Coupa Software [COUP] and Workday [WDAY]. Year-to-date, the ETF is down 38.7%.
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