There are more gains to come in Grab Holdings’ stock after a 35 per cent surge so far this quarter, according to some analysts.
The ride-hailing and delivery firm will boost its profit as it fends off competition and benefits from scale, according to Evercore ISI International, which recently raised the stock’s price target to US$8 from US$7. That implies a 56 per cent upside from the shares’ current level. Analysts expect the company to swing back to a US$6.5 million operating profit in the current quarter, from a US$38 million loss in the preceding three months, according to data compiled by Bloomberg.
Singapore-based Grab, whose stock rally this quarter made it the global outperformer in its sector, may finally be fulfilling years of promises as it has achieved dominance in South-east Asia’s ride-hailing and online food delivery sales, warding off its major rival GoTo Group from Indonesia.
Despite the latest turnaround, the challenge will be for Grab to continue amassing users in the region, with a long runway ahead to reach the same level of penetration in South-east Asia that Uber Technologies has achieved in the US, according to Bloomberg Intelligence analyst Nathan Naidu.
The company’s continued strength in its core services, paired with an escalation in its digital banks’ growth, will build momentum in the fourth quarter, said Maybank Securities analyst Hussaini Saifee. Grab’s scale advantage, which smaller players lack, has helped it spend less to incentivise customers and gain income opportunities for its drivers, analysts say.
After its third-quarter profit beat, at least 22 analysts raised their target prices. The stock closed at US$5.13 on Friday.
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“We believe secular growth, leading market share and scale will drive significant profitability for Grab over time, just as they have for Uber globally,” Evercore analysts including Mark Mahaney wrote in a note.
Grab has seen revenue growth slow dramatically from triple-digit rates in previous years, as customers in the region curb spending to cope with elevated inflation and interest rates amid a challenging macroeconomic climate.
To be sure, others say the stock’s gains already reflect improvements in fundamentals. Margins will have to expand by a few hundred basis points for both delivery and ride-sharing to keep supporting the rally, according to Morningstar’s analyst Kai Wang.
Grab’s shares will likely keep rising as long as it continues to deliver good results, driven by structural opportunities in South-east Asia that include a lack of sensitivity to potential further US tariffs under a second Donald Trump presidency, according to Citigroup analyst Alicia Yap. The stock is “definitely generating a lot of new interest from investors,” she said. BLOOMBERG
