1. Grab Holdings Limited (NASDAQ:GRAB)
Number of Hedge Fund Holders: 37
Grab Holdings Limited (NASDAQ:GRAB), also known as the Uber of Southeast Asia, operates a super-app which provides delivery, mobility, and financial services in the region. People use the company’s app to request cabs, order food, and make online payments. This penny stock is an investors’ favourite and we say that because it was held by 37 hedge funds at the close of Q1 2024 with stakes worth nearly $613 million.
In Q1 2024, Grab (NASDAQ:GRAB) reported an all-time-high adjusted EBITDA of $62 million and raised its adjusted EBITDA guidance for the full year to a range between $250 million and $270 million (prior range: $180-$200 million). Revenue grew by 24% year over year to $635 million, driven by strong performance across the board. While these numbers are decent, what’s more important is that the company grew its monthly transacting users to 38 million during the quarter, up from 33 million a year ago.
Why are users growing you might ask and the reason is simple: Grab’s (NASDAQ:GRAB) app is getting better due to the company’s approach to using AI. The company’s AI engines are trained with its local markets in mind, on a Southeast Asia-specific dataset. This is why when a Malaysian consumer enters “mekdi” in Grab’s search bar, the term gets matched to “McDonald’s”, and similarly other local dialects are interpreted by its AI and matched to the corresponding intended terms.
The company is committed to improving its app using AI and spent $250 million collectively on AI development between 2019 and 2020. In May, Grab (NASDAQ:GRAB) entered a partnership with OpenAI to build and deploy models that will enrich user experience via AI-powered customer support chatbots, improve navigation on maps, and improve accessibility for visually impaired and elderly individuals.
GRAB is a risky investment, no doubt about that, but for risk-tolerant growth investors here’s the takeaway:
Grab (NASDAQ:GRAB) has a near-monopoly position in Southeast Asia when it comes to ride-hailing and delivery services. It acquired Uber’s Southeast Asian operations back in 2018 and also made a bid for Singapore’s third-largest taxi operator, Trans-cab, back in 2023. Although the deal is under regulatory review, if it goes through, it will strengthen Grab’s (NASDAQ:GRAB) market position.
Moreover, a steady growth in users on its app, driven by a better and more personalized experience for them, can potentially translate into higher earnings. While it is unprofitable right now, you need to see that there are over 675 million people in Southeast Asia and Grab (NASDAQ:GRAB) has only captured about 6% of its total addressable market. So, there is potential here and the stock has room to run. The company ended the quarter with $2.1 billion in cash and only lost $294 million over the past twelve months.
Grab (NASDAQ:GRAB) can use its cash reserves to facilitate growth over the next several quarters and potentially deliver strong returns. Analysts hold a consensus Buy opinion on the stock and their 1-year median price target points to a 32% upside from current levels.
While we acknowledge the potential of Grab Holdings Limited (NASDAQ:GRAB) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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