On Tuesday, Barclays (LON:BARC) maintained its Overweight rating on Grab Holdings Inc. (NASDAQ:GRAB) and increased the price target to $5.50 from the previous $4.70. This revision follows Grab's reported growth in Gross Merchandise Volume (GMV) for its food delivery and ride-hailing mobility services in the third quarter. The company also showed a significant improvement in quarter-over-quarter EBITDA margins for its core segments.
The analyst from Barclays highlighted that Grab's EBITDA exceeded expectations by over 30%, bolstered by the accelerated GMV growth that has persisted into the fourth quarter. The management of Grab anticipates a stable margin outlook for the seasonally stronger Q4. The firm's assessment suggests that Grab has successfully struck a balance between growth and profitability.
Additionally, Grab's management is optimistic about the revenue growth trajectory leading up to 2025. This confidence is supported by the expansion of its fintech business, which now includes all three digital banks offering loan products to borrowers. The company is also expanding its product offerings in both the high-end and budget segments for food delivery and rides.
The report further noted that Grab's high-margin advertising revenue has increased, now accounting for 1.6% of the delivery GMV, up from 1.4% in the second quarter. With its leading position in Southeast Asia for both food delivery and rides, Grab benefits from a dominant market presence and the advantages of scale.
In other recent news, Evercore ISI raised its price target for Grab Holdings to $8.00, while maintaining an Outperform rating on the shares. Similarly, Citi raised its target for the company to $5.90, also maintaining a Buy rating.
Grab Holdings' consistent growth and profitability have been highlighted by both firms, with Evercore ISI expressing confidence in Grab's position as a top pick within the Small to Mid-Cap (SMiD Cap) Internet Sector. Citi's analysis points to the use of AI technology for product development and user targeting, and synergies across different segments as factors that strengthen the growth outlook for 2025.
The company's management is also contemplating an increase in the buyback program from the current $500 million, further underscoring the positive financial performance.
These are the recent developments that have been reported.
InvestingPro Insights
Grab Holdings Inc. (NASDAQ:GRAB) has been showing strong market performance, aligning with Barclays' optimistic outlook. According to InvestingPro data, Grab's stock has seen impressive returns, with a 20% increase over the past month and a 34.36% gain over the last three months. This upward trend is reflected in the stock trading near its 52-week high, with the current price at 98.65% of that peak.
The company's revenue growth remains robust, with InvestingPro data showing a 30.77% increase in the last twelve months as of Q2 2024, reaching $2.584 billion. This growth trajectory supports management's positive outlook for revenue expansion through 2025.
However, investors should note that despite the strong top-line growth, Grab is not yet profitable. An InvestingPro Tip indicates that analysts do not anticipate the company to be profitable this year. This aligns with the reported adjusted operating income of -$273 million for the last twelve months.
On a positive note, another InvestingPro Tip reveals that Grab holds more cash than debt on its balance sheet, suggesting financial stability as it pursues growth. This strong liquidity position could be crucial as the company continues to invest in expanding its services and digital banking offerings.
For investors seeking a more comprehensive analysis, InvestingPro offers 8 additional tips for Grab Holdings, providing deeper insights into the company's financial health and market position.
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