Southeast Asian ride-hailing and delivery company Grab Holdings (NASDAQ:GRAB) is headquartered in Singapore and provides a “super-app.” If you’re just now learning about the company, you might be tempted to own GRAB stock as an intriguing international investment.
It’s easy to see why Grab Holdings describes its app as “super.” Local app users can get food, medications, flowers and other goods delivered quickly and conveniently.
This certainly sounds like a terrific business model, and a great way to get exposure to Asian e-commerce. However, the recent performance of GRAB stock has been less than stellar.
So, investors are faced with a billion-dollar question. Is Wall Street wrong in its assessment of Grab Holdings? Before you jump into the trade, you’ll definitely want to consider the company’s fiscal stats.
As it turns out, some of the data points look great, while others raise major red flags.
A Closer Look at GRAB Stock
Grab Holdings made its debut on the Nasdaq on Dec. 2 after the company reverse-merged with blank-check company Altimeter Growth Corp.
The stock started off near $9, and it hit the $17 resistance level twice: once in January 2021, and another time in November of that year. Therefore, that’s a price level to keep an eye on and, potentially, a place to consider taking profits.
Yet, GRAB stock might not revisit $17 for a long time. After topping out at $17.15 in November, the stock dove below $4, shaking many shareholders out of the trade.
Breaking below the $5 level is significant. Some traders will informally classify a stock that represents a small company and trades for less than $5 per share as a penny stock.
Can GRAB stock escape from Penny Stock Land? The answer may depend on the company’s financials, which are a mix of good and not-so-good.
An Irrational Response?
On March 3, Grab Holdings released its fourth-quarter and full-year 2021 fiscal results. As you might expect, this was a high-stakes press release.
After the results were disclosed, GRAB stock fell sharply, from more than $5 to less than $4. At first glance, one might be tempted to conclude that this was an irrational response from nervous investors.
Notably, Grab Holdings’ full-year 2021 gross merchandise value (GMV) grew 29% year-over-year, reaching $16.1 billion and marking a record year for the company.
Not only that, but the company’s full-year 2021 revenue increased 44% year-over-year to $675 million. Plus, in 2021’s fourth quarter, Grab Holdings grew its GMV by 26% year-over-year to $4.5 billion, thereby producing four consecutive record quarters for the company.
Furthermore, Grab Holdings’ Q4 2021 average spend per user increased 23% year-over-year to $173. So far, it seems like the company has been firing on all cylinders.
Here’s the Bad News
Unfortunately, Grab Holdings’ financial performance has been far from perfect.
Why did investors dump their GRAB stock shares? Perhaps it was because the company reported a 44% year-over-year revenue decline in Q4 2021.
In defense of this disappointing result, Grab Holdings cited an increase in consumer incentives for mobility and deliveries. The company also pointed to investments in “driver supply to support strong recovery in mobility demand.”
The fourth-quarter revenue decline wasn’t the only problem, though. Turning to the bottom-line results, Grab Holdings’ full-year 2021 earnings loss widened by 30% to $3.555 billion, while the company’s Q4 2021 earnings loss increased 73% to $1.1 billion.
It’s understandable if Grab Holdings wants to spend money on consumer incentives and “driver supply.” However, given the company’s lack of profitability, Grab Holdings should consider cutting back its expenditures.
The Bottom Line
After viewing the full picture, including the company’s widening earnings loss, we can see why the GRAB stock price dropped.
Is it a good time to pick up some shares at a discount? The most cautious strategy would probably be to wait and see if Grab Holdings plans to cut back on its spending.
Unless/until that happens, it’s not a bad idea to stay on the sidelines and keep an eye out for further developments.
On the date of publication, David Moadel 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.
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