1. Grab Holdings Limited (NASDAQ: GRAB)
Number of Hedge Fund Holders: 37
Grab Holdings Ltd (NASDAQ: GRAB) is a multinational software developer company that is based in Singapore. It mainly operates three segments of super apps: food delivery, ride-hailing, and online payment services on smartphone devices. The company operates in over 700 cities in 8 Southeast Asian countries: Singapore, Cambodia, Myanmar, Indonesia, the Philippines, Malaysia, Thailand, and Vietnam.
The firm also provides digital insurance and lending services to fulfill the financial requirements of merchants and consumers. Some apps are listed as GrabShare, GrabCar, GrabFood, GrabMart, and GrabInvest, etc. In 2023, Fast Company, an American Business Magazine listed Grab Holdings Ltd (NASDAQ: GRAB) as one of the most innovative companies in the Asia-Pacific region.
Grab Holdings Ltd (NASDAQ: GRAB) has a strong presence in the Southeast Asian ride-hailing and food delivery business. For instance, in 2018 the company announced a partnership with Uber and acquired Uber’s Southeast Asia operations. Furthermore, Grab Holdings also announced a bid to acquire Transcab in July 2023. However, the deal is in the pipeline and is being reviewed, if it goes through this deal will further strengthen Grab’s position in the ride-hailing market.
In its first quarter, 2024 financial highlights, the company reported 24% year-on-year growth and generated a revenue of $653 million in the FQ1 2024 driven by the growth of sales in all segments amid reduced On Demand incentives as a percentage of On-Demand GMV.
The food delivery business and ride-sharing business grew by 19% and 27% respectively and outperformed analysts’ consensus estimates despite seasonal impacts from Chinese festivals and the Ramadan fasting period in the first quarter. While these figures are impressive, an important development is that the company upgraded its monthly transacting users to 38 million in this quarter which grew by 5 million users YoY.
Furthermore, the On-Demand Gross Merchandise Value (GMV) improved by 18% year-on-year owing to the increased consumer demand for mobility and delivery operations.
The company has managed to reduce its losses by reducing operating expenses. The first quarter’s operating loss of $75 million improved by $129 million YoY mostly due to higher revenue and decreased general and administrative costs.
A constant yearly growth, net cash of $4 billion or net cash per share of 1.04$, and a reduction in operating cost are some of the factors that led to the analyst consensus of “Strong Buy’’ for the stock. 7 analysts set the average price target of $5.14 an upside of 45.82% from the current price target.
The quarter’s loss of $115 million improved by $134 million YoY mostly because of gains in Group Adjusted EBITDA and decreases in share-based compensation and net interest costs. In Q1 2024, the company reported an all-time-high adjusted EBITDA of $62 million driven by a robust performance across the board. Keeping in view the growth potential, the firm raised its adjusted EBITDA guidance for the full year to a range between $250 million and $270 million.
On May 15, 2024 Earnings call, Peter Oey, Chief Financial Officer of Grab Holdings Ltd (NASDAQ: GRAB) highlighted the improvement in EBITDA and stated:
“We continued to drive profitable growth in the first quarter, as we achieved another record Adjusted EBITDA,” said Peter Oey, Chief Financial Officer of Grab. “As we drive growth across our business, we remain focused on continued improvements in profitability as demonstrated by our ninth consecutive quarter of Group Adjusted EBITDA expansion while improving shareholder returns and managing our balance sheet. Pursuant to our $500 million share repurchase program, we have repurchased approximately $97 million worth of Class A ordinary shares in March, and also paid down the remaining $497 million balance of our Term Loan B.”
Although Grab Holdings Ltd (NASDAQ: GRAB) has put forth strong revenue growth and reduced its operational costs, the company is yet not profitable. According to analysts in the transportation industry, the company is on the verge of reaching a breakeven given the quarter-over-quarter performance and is expected to be profitable in 2025.
Furthermore, the company has the potential to expand further in the ever-growing market of Southasia which has a population of over 675 million people.
According to Insider Monkey’s database, 37 hedge funds held stakes in Grab Holdings Ltd (NASDAQ: GRAB) and Tiger Global Management LLC group managed by Chase Coleman and Feroz Dewan has the highest stakes of 66.8 million shares having a value of $209.75 million.
While we acknowledge the potential of Grab Holdings as an investment, 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 Grab Holdings but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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