Grab Stock Price Forecast March 2022 – Time to Buy GRAB Stock?

Grab, which went public through a SPAC reverse merger in 2021, is down 53% for the year. The stock hit its all-time low last week and while it recovered somewhat from the lows, it is still in the penny stock category and trades below $5.

Grab joins the long list of de-SPACs that have turned penny stocks. What’s the forecast for the stock and should you buy the dip in the company?

Grab was the biggest SPAC merger

When Grab went public in 2021, it had the reputation of being the largest SPAC merger. Lucid Motors, which also went public through a SPAC reverse merger last year, held the position of the biggest SPAC merger before Grab. However, while Lucid Motors still comfortably trades above the SPAC IPO price, Grab trades at a steep discount. The drawdown from the 52-week highs is even steeper for the Southeast Asian company.

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SPACs have fallen

Incidentally, the majority of SPACs are trading below the $10 price level after the merger and almost all of them are well below the 52-week high prices. Some of the famed names like Clover Health, WeWork, Beachbody, Planet Labs, and 23andMe are penny names now. While the broader markets have also corrected, the crash in de-SPACs has been far worse.

Almost all of the companies that went public through a SPAC reverse merger were loss-making growth companies. Also, the kind of valuations these companies, which includes Grab, managed to attract in the merger, were not sustainable. The expected increase in interest rated has meant that their valuations started to look even uglier.

Growth stocks have fallen

Add the slowing growth and rising costs that a lot of these companies are facing, and we had a perfect storm. Investors have exited such names, instead preferring the stability of reasonably valued mature companies. Notably, while the S&P 500 and Nasdaq have tumbled in 2022, Warren Buffett’s Berkshire Hathaway stock is in the green.

Grab stock recent developments

Grab reported its fourth-quarter earnings last week which disappointed markets. It reported revenues of $122 million, which were 44% lower than the corresponding period last year. The metric fell well short of the $167 million that analysts were expecting. The company’s losses ballooned to $1.1 billion in the quarter, which was higher than the $635 million it had posted in the corresponding period last year. While the company incurred expenses related to listing in the fourth quarter, the net loss reading was nonetheless higher than what analysts were expecting.

Investments took a tool on the financial performance

Grab said that its revenues tumbled as it “preemptively invested to grow driver supply to support strong recovery in mobility demand.” Looking at the other metrics, its GMV (gross merchandise value) increased 26% to $4.5 billion. It was the fourth straight quarter of record GMV for the company. Its MTUs (monthly transacting users) increased 3% as compared to the corresponding period last year while the average spending per user increased 23% to $173.

Grab’s guidance

It was the first earnings for Grab since its listing and like many other de-SPACs, it has disappointed with the financial performance. Commenting on the first-quarter guidance, Grab said that it expects GMV of its Deliveries business to be between $2.4-$2.5 billion. The mobility GMV is expected to be between $0.75-$0.85 billion.

It said that the Financial Services Pre-InterCo TPV (total payment volume) is expected to be between $3.1 billion to $3.2 billion in the first quarter. It said that between Q2 2022-Q4 2022, it expects the YoY GMV growth to be between 30-35% in all the quarters depending on the COVID-19 situation.

Grab stock long term forecast

Commenting on the long-term forecast, it said “Looking beyond 2022, Grab is progressing towards core food delivery Segment Adjusted EBITDA breakeven by the first half of 2023 and deliveries Segment Adjusted EBITDA breakeven by the end of 2023. In the long term, Grab is targeting steady state Adjusted EBITDA to GMV margins of 12% in mobility and 3% in deliveries.”

Superapp

Southeast Asia has a total population of 670 million and Grab sees its total addressable market rising to $180 billion by 2025. The company expects to post revenues of $4.5 billion and an adjusted EBITDA of $0.5 billion by 2025.

Grab is a play on the long-term growth story in the ASEAN region. The company has a strong moat in the region and is transforming into a superapp. The long-term forecast for the company looks positive. Notably, with Chinese stocks looking risky amid the continued crackdown in the communist country, some investors might find Southeast Asia as a good bet.

Grab stock forecast

While the long-term forecast for the company looks positive, the near-term outlook looks quite muddied. Several Wall Street analysts downgraded the stock after the earnings release. JPMorgan Chase downgraded the stock from overweight to neutral while slashing the target price from $12.50-$5.70. DBS Vickers also downgraded the stock from a buy to hold while lowering the target price to $5.60. Before the earnings release, CLSA had initiated coverage on GRAB stock with a sell rating and $4.76 target price.

Should you buy the stock?

Cross-selling and upselling are two key opportunities for Grab. The company continues to add more services on the platform which would help it increase the target market as well as revenues and moves towards the goal of an “everyday everything app.”

However, it is facing several headwinds in the short term as it tries to cope with the driver shortage. It has had to increase driver incentive to get them back to work, which has been hurting its financial performance. The company’s CFO Peter Oey said in a Wall Street Journal Interview that “I think the later first half [of 2022] is important to us.” He added, “It will take one to two quarters to get that equilibrium between drivers and riders, between supply and demand.”

Citi advises buying the dip in Grab stock

He added, “We’re focusing on executing the business, and we feel that the stock price will take care of itself.” Citi meanwhile believes that the crash in Grab stock is a buying opportunity. “We believe broad market weakness amid geopolitical instability might have prompted some investors to cut losses on their position,” it said in a client note.

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