(Feb 22): Grab Holdings Ltd’s shares slid 5% after the ride-hailing leader forecast 2024 revenue below analysts’ estimates, suggesting a deeper-than-anticipated slowdown in its core online business.
The Singapore-based company, which competes with GoTo in mobility and services such as meal delivery, expects a 14% to 17% rise in sales to US$2.7 billion (RM12.8 billion) to US$2.75 billion, lagging the US$2.8 billion average projection. The disappointing forecast overshadowed plans to buy back as much as US$500 million of stock and its second straight quarterly profit — albeit on an adjusted basis.
After years of spending to gain market share and fend off competition, Grab is taking steps to become a more financially mature company. It’s focusing on the bottom line after years of swift expansion into markets from Malaysia to Thailand. Like backer Uber Technologies Inc, it’s slashed jobs and reined in spending to pivot toward profitability. Uber also announced its first buyback this month.
But the effort on the bottom line coincides with a dramatic slowdown in growth from the triple-digit pace of past years, underscoring the impact of economic uncertainty and competition. Revenue rose just 30% in the December quarter, its slowest pace of growth since at least 2022.
The challenging market has forced Grab and its rivals to consider aggressive options. Grab and GoTo have this year revived discussions about a merger of their core businesses, Bloomberg News reported, an alliance that could help stem spending to chase consumers across the region. Grab had also been linked to talks to take over the foodpanda brand in several markets, but negotiations fell through because parties couldn’t agree on deal terms.
Shares of Grab are down sharply since it went public through a US blank-check company in late 2021. Still, they’ve stabilized this year as losses narrowed, outperforming its main regional rivals.
On Thursday, it reported US$35 million in adjusted earnings before interest, taxes, depreciation and amortisation, lagging estimates for US$38.9 million. Grab also reported positive free cash flow for the December quarter, though again on an adjusted basis. The company posted its first-ever profit on that basis for the September quarter.
“Free cash flow should remain strong after it turned positive in 3Q. This is driven by sequential expansion in the deliveries and mobility segments’ bottom lines, with the former potentially contributing to most of 4Q’s incremental adjusted Ebitda amid rising contribution of GrabUnlimited subscribers, users who spent 4.2x more than non-subscribers in 3Q. In the longer term, additional boost should come from economical mobility offerings, where opportunities to push advertising are high. Financial services could be another growth catalyst as digital banks in Indonesia, Singapore and Malaysia ramp up, meaning loan and deposit metrics will be key to watch,” said Bloomberg analyst Nathan Naidu.