Morgan Stanley has updated its stance on Grab Holdings Inc. (NASDAQ: GRAB), increasing the price target to $4.90 from the previous $4.80, while keeping an Overweight rating on the stock.
The firm's analyst cited a combination of higher profitability and strong revenue growth as key drivers behind the optimistic view of the company's prospects.
The analyst highlighted an anticipated quarter-over-quarter margin improvement in the third quarter of 2024.
Adjustments to revenue and EBITDA forecasts were made in light of diminishing foreign exchange headwinds for the third quarter and potential tailwinds in the fourth quarter, along with continued business momentum.
According to Morgan Stanley's estimates, Grab's revenue growth for 2024 is expected to hit 17%, aligning with the upper range of the management's guidance.
The firm has projected a 2024 adjusted EBITDA of $288 million, which is roughly 7% higher than the management's highest projections.
The third-quarter results, which are expected to be released in mid-November, are seen as a potential positive catalyst for Grab. Morgan Stanley anticipates the company's adjusted EBITDA for the third quarter to be around $78 million, a 21% increase from the previous quarter and higher than the consensus estimate of $70 million.
In other recent news, Grab Holdings' Q2 2024 results showcased a robust financial and operational performance, marking its 10th consecutive quarter of improved adjusted EBITDA and positive adjusted free cash flow.
The quarterly report indicated a group revenue of $664 million, a 17% increase from the previous year, and a 61% increase in revenues from its financial services segment. The company maintains its full-year revenue guidance of $2.7 billion to $2.75 billion.
In addition to strong earnings, Benchmark, following investor meetings, reaffirmed its Buy rating for Grab, highlighting the company's strategy to manage margin volatility and drive growth. The firm's confidence in Grab stems from the company's comprehensive plan to stabilize margins by offering a mix of value and premium product options. The company also outlined a growth strategy for fiscal year 2025, which includes launching new products and optimizing costs.
InvestingPro Insights
Recent data from InvestingPro adds depth to Morgan Stanley's optimistic outlook on Grab Holdings Inc. The company's market capitalization stands at $15.01 billion, reflecting its significant presence in the ride-hailing and delivery services market. Grab's revenue growth remains robust, with a 30.77% increase over the last twelve months as of Q2 2024, surpassing $2.58 billion. This aligns well with Morgan Stanley's projection of 17% revenue growth for 2024.
InvestingPro Tips highlight Grab's strong financial position, noting that the company "holds more cash than debt on its balance sheet" and "liquid assets exceed short-term obligations." These factors provide Grab with financial flexibility to pursue growth opportunities and weather potential market challenges.
Despite the positive revenue trajectory, it's worth noting that Grab is "not profitable over the last twelve months," with a negative P/E ratio of -64.74. This underscores the importance of the projected EBITDA improvements mentioned in Morgan Stanley's analysis.
Investors seeking a more comprehensive analysis can access additional InvestingPro Tips, with 5 more tips available for Grab Holdings Inc. on the InvestingPro platform.
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