Asian ride-hailing stock Grab Holdings (NASDAQ: GRAB) fell sharply on Thursday after investors were left unimpressed at the company’s fourth quarter earnings. Let’s take a look at the stock and see how it stacks up against its competitors.
What is Grab?
Grab Holdings was founded in 2012 and operates a transportation and fintech platform in Southeast Asia. The Singapore-based company offers a range of services, including mobility, food, package and grocery delivery services, mobile payments, and financial services.
The company joined the NASDAQ in December 2021 via a special purpose acquisition company named Altimeter Growth Corp. However, the company’s share price has since dropped by more than half.
Grab Holdings Q4 Highlights
Here’s what Grab considered to be the high points of its fourth quarter performance:
Record quarter and year in gross merchandise value, exceeding the high end of full year 2021 guidance range.
Q4 gross merchandise value grew by 26% YoY to $4.5bn.
Deliveries gross merchandise value increased by 52% in Q4.
The company claimed to have retained regional category leadership in 2021 for online food delivery, ride-hailing and e-wallet payments; accounting for more than half of Southeast Asia’s total food delivery gross merchandise value.
Grab co-founder and CEO, Anthony Tan, said:
“2021 was our strongest year yet, even as we faced tougher conditions with the Delta and Omicron variants. We achieved outsized growth in both GMV and Revenues while continuing to improve our Adjusted EBITDA margins year over year, demonstrating the resilience and growing relevance of the superapp.
"Southeast Asians are relying more and more on the Grab superapp for a multitude of daily needs. 56% of our users are now using two or more Grab services and the average user spend on our platform in 2021 grew 31% year over year.
“We expect 2022 to be another watershed year for Grab, as we get ready to launch our digibank in Singapore, and continue to pursue the massive opportunities in deliveries to outserve consumers with more options and better convenience.”
Grab Holdings Q4 Earnings Disappoint
Despite the ride-hailing business’ efforts to assure investors that it had enjoyed a record-breaking quarter and year, its share price fell by more than 30% in reaction to the release.
This appears to have happened due to concerns over the company’s revenue and earnings. Grab achieved revenue of $122m during the three-month period, which amounted to a 44% decline compared to the same period 12 months prior.
This drop in revenue came as the company doled out incentives to both its drivers and its customers, though the move appears to have backfired. Cost of revenue also climbed from $244m to $298m.
Grab Holdings’ guidance for the next quarter was also troubling for investors, with the company forecasting gross merchandise value of between $3.15bn to $3.3bn. This is significantly below what was achieved in the fourth quarter.
With ride-hailing apps having struggled during the pandemic period, investors might have been hoping that these results would indicate some kind of return to form from the Southeast Asian business. However, this has not been the case and Grab now urgently needs to up its game if it wants to convince the market of its viability.
The company’s chief financial officer Peter Oey told the Wall Street Journal the company would continue to invest in driver incentives and that it would take three to six months to achieve equilibrium between supply and demand.
It looks like the company is running out of time to sort itself out. Indeed, the company’s shares have more than halved in value since the start of the new year.
Other Ride Hailing Stocks
Other ride-hailing stocks like Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) have also fallen since the start of 2022, though neither has dropped quite as severely as Grab.
Indeed, they have even shared some positive news over the year to date. Uber said in February that bookings for its ride-hailing services had returned to pre-pandemic levels. Meanwhile, it’s bookings and earnings beat expectations, though long-term operating profit projections dampened investors’ spirits by falling short of the mark.
Still, the results painted a far different picture than that illustrated by Grab’s results.
Lyft has also had some joy recently, with the company recording better revenue and earnings than anticipated in its fourth quarter, though it had fewer riders than expected. Additionally, the company made positive noises about the full year.
It’s worth noting that these apps operate in different geographies to Grab, with Grab’s hold on the Southeast Asian market having been deemed too strong for Uber and Lyft to wade in and seek their own slice. Even so, Grab’s poor form in comparison to industry peers leaves the stock looking like a risky and unattractive prospect for the moment.