On Thursday, HSBC analyst downgraded shares of Grab Holdings Inc. (NASDAQ:GRAB) from Buy to Hold, while increasing the price target to $5.50 from $4.25. The revision comes after observing significant growth in Grab's on-demand monthly transacting users (MTU), which saw a 19% year-over-year increase in the third quarter of 2024. According to InvestingPro data, Grab has demonstrated remarkable market performance, with a 69% return over the past year and a current market capitalization of $21.4 billion.
The analyst noted that Grab's investments in product diversification to expand its total addressable market have yielded positive outcomes. These strategic moves have led to higher customer engagement through more affordable solutions, better cross-selling within its ecosystem, and enhanced margins due to a greater contribution from high-value offerings.
InvestingPro analysis reveals the company maintains strong financial health with a "GOOD" overall rating and impressive revenue growth of 21.7% in the last twelve months. Get access to 8 more exclusive InvestingPro Tips and comprehensive financial analysis through the Pro Research Report. Specifically, the company saw a 30% year-over-year growth in high-value mobility rides gross merchandise value (GMV) in the third quarter, and an increase in priority deliveries within the Delivery segment.
The adoption of GrabUnlimited, the company's subscription program, has notably increased, particularly impacting the Delivery segment by raising order frequency, reducing cost per order, and aiding in margin expansion. The analyst expressed confidence that Grab is well-positioned to solidify its leadership in core areas such as ride-hailing and delivery services, given its continuous rollout of innovative and affordable products.
Projections for Grab's adjusted EBITDA are optimistic, with an anticipation of a rise to $336 million in 2024 and an expected surge at a compound annual growth rate (CAGR) of 64% from 2024 to 2026, potentially reaching $902 million in 2026.
However, the analyst pointed out that the approximately 58% year-to-date re-rating of Grab's stock, compared to the NASDAQ's approximate 34% increase, likely already accounts for these improvements in fundamentals. Based on InvestingPro's Fair Value analysis, the stock appears slightly overvalued at current levels, despite maintaining a healthy current ratio of 2.7 and strong analyst consensus. Consequently, the analyst believes the risk-reward profile for Grab's stock is now balanced.
In other recent news, Grab Holdings Inc. has been the focus of several investment firms following its strong performance in the third quarter. The company's earnings and revenue results exceeded expectations, with a 4.7% revenue beat and a 37% adjusted EBITDA beat. Grab's management projects full-year 2024 EBITDA between $308 million and $313 million. Furthermore, Grab's lending products, launched in all three markets, saw a 38% rise in loan dispersals year-on-year.
Citi maintained a Buy rating on Grab shares with a price target of $5.90, while BofA Securities downgraded Grab's rating from Buy to Underperform. Loop Capital raised its price target for Grab to $5.75, Deutsche Bank (ETR:DBKGn) lifted its target to $6.00, and Mizuho (NYSE:MFG) Securities increased its price target to $6.00, all maintaining positive outlooks on the company.
These recent developments signal confidence in the company's financial health and growth trajectory. Despite intense competition in Indonesia, Grab continues to maintain positive EBITDA and revenue growth. The company is also considering increasing its buyback program from the current $500 million.
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