GRAB's Swift Path to Profitability and Market Consolidation - Impressed Analysts Raise Price Target By 50%

Benchmark analyst Fawne Jiang maintained Grab Holdings Limited GRAB with a Buy and raised the price target from $4 to $6.

GRAB posted solid results for 2Q23 and revised their full-year guidance positively. 

They now anticipate breaking even in 3Q23, an improvement from the earlier 4Q23 estimate. Some key points that underline GRAB's valuation include that GRAB is leading in the market and is near its steady-state margin goal in its main segments, Mobility, and Delivery. 

This positioning lets them delve deeper into the market and grow their market share. 

Their swift shift to profitability demonstrates sustainability without any market share loss. The company displays promising long-term growth avenues in the Mobility, Delivery, Fintech, and advertising sectors.

Mobility shows a robust recovery trajectory. 

The segment experienced a 28% year-over-year (Y/Y) growth in Gross Merchandise Volume (GMV) in 2Q23, attributed to a rise in monthly active users and transactions. Furthermore, they successfully increased driver supply despite labor market challenges. 

With new services introduced in Malaysia, Indonesia, and the Philippines, GRAB aims for greater market penetration. The adjusted EBITDA margin for this segment stood at 12.3% in 2Q, aligning with the set targets.

Delivery profitability is on an upward trend. This segment set a new record with a 4% Y/Y GMV growth in 2Q23. 

Positive change is likely, pushing the GMV growth estimate for FY23 to 5%.

Fintech's growth remains strong despite a 13% Y/Y drop in GMV in 2Q23. The sector witnessed a significant 223% revenue growth Y/Y, with a 35% reduction in adjusted EBITDA loss. 

While losses will likely stabilize in the second half of 2023, Fintech's annual EBITDA loss projection reduced in FY23 to $(284) million.

Overall, the group's revenue estimate for FY23 has increased to $2.30 billion, a 61% Y/Y growth, with an adjusted EBITDA set at $(38) million. The company's valuation, centered on FY24 predictions, has shifted focus from sales to profitability. 

GRAB's long-term potential lies in capitalizing on synergies from its broadening ecosystem and further market penetration. Given its strategic positioning, GRAB is a pivotal asset in Southeast Asian market portfolios. 

Barclays analyst Jiong Shao upgraded Grab from Equal-Weight to Overweight and a $4.5 price target.

Citigroup analyst Alicia Yap maintained Grab with a Buy and raised the price target from $4.8 to $5.2.

Price Action: GRAB shares traded higher by 0.41% at $3.72 on the last check Thursday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.