On Tuesday, Citi updated its outlook on Grab Holdings Inc. (NASDAQ: NASDAQ:GRAB), increasing the price target to $5.90 from the previous $5.00, while keeping a Buy rating on the company's shares. The adjustment follows Grab's reported revenue and adjusted EBITDA, which surpassed expectations for the third quarter of 2024.
Grab's third-quarter performance showed a 4.7% revenue beat and a 37% adjusted EBITDA beat. Additionally, the firm has revised its full-year revenue and EBITDA guidance upwards by 1.7% and 19%, respectively.
Citi's analysis suggests that Grab's investments in diversifying its products and services and capitalizing on cross-selling opportunities are yielding positive results, evidenced by growth reacceleration and improved profitability.
The company's growth prospects appear to be strengthening, attributed to factors such as low Monthly Transacting Users (MTU) penetration coupled with increased transaction frequency and spending per user. The successful integration of Chope and the rise in advertising traction are also contributing to a more optimistic growth outlook.
The analyst notes that by utilizing AI technology for product development and user targeting, as well as synergies across different segments such as food, Mart, deliveries, and mobilities, there is a stronger conviction in the growth outlook for 2025.
Furthermore, Grab's ability to maintain healthy free cash flow and operating efficiency has reinforced confidence in the company's sustainable profitability trend. Following the revised estimates, Citi has raised its Sum of the Parts (SOTP) valuation to $5.90, while also removing the High-Risk Rating due to Grab's consistent financial performance over the past few quarters.
In other recent news, Grab Holdings Limited reported a strong third quarter in 2024, with group adjusted EBITDA tripling to $90 million compared to the previous year. The robust performance marks the 11th consecutive quarter of improvement, with Monthly Transacting Users (MTUs) increasing by 16% year-on-year to 42 million.
The delivery business also saw a 16% growth, and the company's General Merchandise Volume (GMV) from high-value mobility services increased by 30%.
In addition, the company's lending products, launched in all three markets, saw a 38% rise in loan dispersals year-on-year. Grab's net cash liquidity stands at $5.8 billion, with free cash flow in Q3 amounting to $138 million. The company's management is contemplating an increase in the buyback program from the current $500 million.
Despite intense competition in Indonesia, Grab continues to maintain positive EBITDA and revenue growth. The company's banking sector saw a 50% quarter-on-quarter increase in customer deposits, surpassing $1 billion. The full-year 2024 EBITDA is projected to be between $308 million and $313 million, as shared by the company's management.
These are the recent developments that have been reported.
InvestingPro Insights
Grab Holdings Inc.'s recent performance aligns with several key metrics and insights from InvestingPro. The company's revenue growth of 30.77% over the last twelve months supports Citi's observation of Grab's strengthening growth prospects. This growth is particularly impressive given the company's already substantial market capitalization of $17.35 billion.
InvestingPro Tips highlight that Grab is trading near its 52-week high and has shown strong returns over the last month and three months, which corroborates the positive sentiment expressed in Citi's analysis. The stock's recent performance, with a 34.36% price return over the past three months, reflects investor confidence in Grab's strategic initiatives and improved financial outlook.
However, it's worth noting that despite the revenue growth and positive market performance, Grab is not yet profitable over the last twelve months. This aligns with the InvestingPro Tip indicating that analysts do not anticipate the company to be profitable this year. This context adds depth to Citi's emphasis on Grab's path towards sustainable profitability.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Grab Holdings Inc., providing a broader perspective on the company's financial health and market position.
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