On Wednesday, Citi reaffirmed its Buy rating on Grab Holdings Inc. (NASDAQ:GRAB), maintaining a price target of $5.00. The firm anticipates that the company will announce its third-quarter 2024 results around mid-November. Adjustments to the International Financial Reporting Standards (IFRS) revenue and EBITDA forecasts have been made to account for seasonal trends, advertising revenue contributions, and favorable foreign exchange conditions. These adjustments are expected to contribute to improved EBITDA, particularly within the delivery business.
The analyst predicts that Grab's mobility and delivery services will continue to show sequential growth in transactions and IFRS revenues. This is attributed to an enhanced product mix and the introduction of more affordable options for customers. Grab is also expected to uphold its full-year 2024 revenue and adjusted EBITDA guidance.
Citi forecasts that Grab will exhibit a positive cash flow, projecting an adjusted Free Cash Flow (FCF) of $29 million for the fiscal year 2024. The company is also expected to reduce its net losses in the second half of 2024 and is modeled to achieve profitability on a net income basis in the third quarter of 2025.
Following the revised estimates, Citi's Sum of the Parts (SOTP) valuation remains unchanged at $5.00. The firm continues to recommend a Buy rating on Grab's stock, albeit with a High Risk designation due to the inherent uncertainties and volatility associated with the company's financial performance and market conditions.
In other recent news, Grab Holdings Inc. has been the subject of positive attention from Morgan Stanley (NYSE:MS) and Benchmark, both reaffirming confidence in the company's growth strategy. Morgan Stanley has raised its price target for Grab Holdings, citing strong revenue growth and higher profitability as key drivers. The firm anticipates a quarter-over-quarter margin improvement in the third quarter of 2024 and expects Grab's revenue growth for 2024 to hit 17%.
Moreover, Morgan Stanley has projected a 2024 adjusted EBITDA of $288 million, about 7% higher than the management's highest projections. On the other hand, Benchmark has praised Grab's strategy to manage margin volatility and drive growth, focusing on a balanced product mix and long-term margin enhancement goals.
These recent developments follow Grab's Q2 2024 results, which showed a robust financial and operational performance. The report indicated a group revenue of $664 million, a 17% increase from the previous year, and a 61% increase in revenues from its financial services segment. The company maintains its full-year revenue guidance of $2.7 billion to $2.75 billion.
InvestingPro Insights
Grab Holdings Inc.'s financial landscape, as revealed by InvestingPro data, aligns with Citi's optimistic outlook. The company's revenue growth of 30.77% over the last twelve months supports Citi's expectation of continued sequential growth in mobility and delivery services. Moreover, Grab's gross profit margin of 40.67% suggests a strong foundation for potential profitability, in line with Citi's projection of reduced net losses and eventual profitability by Q3 2025.
InvestingPro Tips highlight that Grab holds more cash than debt on its balance sheet and its liquid assets exceed short-term obligations. These factors contribute to the company's financial stability and support Citi's forecast of positive cash flow for fiscal year 2024.
While Grab is not currently profitable, as noted by InvestingPro, Citi's analysis suggests a path towards profitability. Investors seeking a more comprehensive understanding of Grab's financial health can explore 3 additional InvestingPro Tips available on the platform.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.