Grab Holdings (NASDAQ:GRAB) stock represents the largest ever special purpose acquisition company merger (SPAC) to date. The deal valued Grab Holdings at nearly $40 billion. It was much heralded, but did not live up to expectations.
Shares began trading above $13 and quickly slid and Grab Holdings was labelled a bust. Prices recovered momentarily a few days later, but ultimately slid again.
The net result is that GRAB shares currently trade below $6 and the company’s market capitalization sits at $21 billion. It is a far cry from where many thought Grab Holdings would be by now.
Given Grab Holdings’ precipitous slide, there’s an argument to be made that it’s a contrarian buy now. That argument partially relies on the super app narrative underpinning the firm’s business offering.
The idea of a super app warrants explanation. We’re all familiar with apps by now. They provide functionality for our devices. Basically, apps are software installed on a device that allow you to perform certain functions: banking, healthcare, communication, ordering food, email, so on and so forth. Any specific task can have an associated app built in order to achieve it.
A super app combines multiple apps under one app: “A super app is a mobile application that provides a variety of seemingly unrelated services via a single mobile interface. Rather than having multiple apps for different services, a super app aims to provide users with access to multiple services in a single location. For example, in one app, users can chat, shop, order rides, apply for a bank loan, and do a variety of other things.”
In the case of Grab Holdings, it is marketed as a regional super app for Southeast Asia.
The Grab Super App
The Grab super app constitutes a wide-ranging geographic footprint. It serves Malaysia, Singapore, the Philippines, Thailand, Indonesia, Vietnam, Cambodia, and Myanmar.
The app also touches on a wide-range of products: All told there are 13 apps which cover deliveries, mobility, financial services, and enterprise.
The firm wanted to separate itself from Uber (NYSE:UBER), implying that it is a more comprehensive offering. One article explains Grab Holdings as a combination of Uber, DoorDash (NYSE:DASH), and PayPal (NASDAQ:PYPL). That’s logical given its extensive financial services offerings.
Further, Grab Holdings claims that it has a number one position in mobility and delivery in all six of its core markets. This might interest you in general, but as an investor you’re probably wondering why should I care? It really all comes down to growth.
The basic bull thesis for investing in GRAB stock right now is that it has shown tremendous growth. Between quarter one of 2018 and Q4 of 2020, the firm experienced a 133% compound annual growth rate. The super app is related to retention rates, which are in turn related to increasing revenues.
Grab Holdings experienced vastly different one-year retention rates directly related to the number of apps they use. Users who used two, three, and more than three apps had retention rates of 47%, 65%, and 79%, respectively.
The more apps a user engages with, the more likely they are to stay with the company, and the more revenue they will contribute. As mentioned, Grab Holdings experienced tremendous revenue growth between the beginning of 2018 and the end of 2020.
However, there is a caveat. Recent earnings weren’t great. On the one hand, Grab Holdings reported a new quarterly GMV of $4 billion. Yet, revenue was down by 9% to $157 million and the company’s losses increased dramatically, reaching $988 million. Those losses reached $366 million a year prior.
What to Do
Grab Holdings clearly represents a tremendous growth opportunity. If we look past the issue of recent losses, chalking them up to the pandemic, an opportunity emerges. GRAB stock is cheap right now. It has a strong foothold in the burgeoning SE Asia market. It’s worth speculating in at these prices.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.