Grab Holdings (NASDAQ: GRAB) gained the spotlight when a spike in volume placed it on the Most Active Penny Stocks list. Penny stocks come with an above-average level of risk, so higher-than-average volume is a dubious indicator at best. The caveat is that a deeper look into Grab Holdings will show a viable business, scaling, on track for profits, and providing exposure to emerging markets.
A Triple Tailwind for Grab Holdings
Emerging markets are expected to outperform the broad market in 2024. Shifting economics and persistent inflation keep developed countries on track to grow less than 2.0%, while emerging markets will more than double that. Regarding Grab Holding’s target markets, Asia ex-China and Japan, they are expected to post 3.9% growth in 2023 compared to the US forecasted 0.9%, providing an attractive alternative to domestic equities.
Grab Holdings is also well-positioned to outperform the 3.9% target. The company operates a “super app,” providing a full-service platform for businesses, entrepreneurs, and consumers that provides ride-share, delivery, digital finance, and other consumer products. eCommerce is expected to grow at a high-single-digit pace, verging on double-digits globally in 2023 and sustain a high-single-digit pace globally for the next 5 to 10 years. Likewise, eCommerce growth in southeast Asia will top 10% this year and next, only falling into the high-single-digits in 2025.
Grab is also on board the AI revolution. It is leaning into artificial intelligence to build its ecosystem, solve problems for businesses and consumers, and improve business quality for entrepreneurs. Among the many applications are predictive and transformer AI models that help users accurately match queries with desired results while using mobile devices. In the company’s words, the search bar “seemingly reads minds.”
Growth Slows for Grab; Company Outperforms Region By Double-Digits
Growth is expected to slow for Grab in the coming quarters and year, but there are several bullish takeaways for investors. Among them is that hyper-growth is slowing from 77% this quarter to about 52% next quarter, double-digit growth is expected to sustain in 2024 above 20%, and the forecast is likely cautious.
Regarding 2023 results, the company outperforms the region, and the Marketbeat.com analysts' consensus estimates and profitability are at hand. The last quarterly guidance expects positive adjusted EBITDA by the end of the year; analysts expect GAAP profits by the end of next year.
Growth and profitability may also get a boost. The company is in talks to acquire Asia assets from Delivery Hero, and the analysts are responding well. They see the acquisition boosting top-line strength, resulting in economies of scale and leading to industry consolidation as smaller players are squeezed out.
The Analysts Are Buying Grab Holdings
Marketbeat.com tracks 7 analysts with ratings on Grab Holdings. That is a significant figure for a small, start-up penny stock in the EM universe and is compounded by a Moderate Buy/Buy rating. The consensus target is down compared to last year but trending higher since the last earnings report and 37% above the recent price action. The price target is up 20% since the Q2 release, and many of the fresh targets have the stock trading above the $4.69 consensus figure.
The market for Grab Holdings is down significantly from the IPO level but is showing signs of stability. The market has moved sideways within a range for about 18 months and shows support at the long-term moving average. Assuming the market follows through on the indications, the stock should continue to move sideways within the range but with an upward bias. A move to the top of the range may result in a complete reversal. Critical resistance is at $4 and may hold until the next earnings report in mid-November.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
