Key Points
- Tech company $Grab Holdings(GRAB)$ went public in December and promptly fell on its face.
- The holding company is dealing with strict pandemic-related lockdowns in Southeast Asia.
- Its dominant market share in its core business could make it an eventual winner.
A company sometimes struggles due to things that are out of its control. If you can tell the difference between a broken stock and a broken company, buying stock in an entity hit with temporary setbacks can reward a patient investor.
Southeast Asian tech companyGrab Holdings(NASDAQ:GRAB)might fall into this category. In December, the super-app developer went public via a special purpose acquisition company (SPAC). In the month since its stock price has fallen more than 40%. Investors may be down on Grab right now, but there's an argument to be made that Grab could be a big winner in 2022.
Grab is dominant in Southeast Asia
Grab is a super-app companyin Southeast Asia; its Grab phone app provides a wide range of services its customers use daily. Users can access ride-hailing, food delivery, shipping, digital banking services, and more all from one app.
Grab's success depends on its firm footing in its essential services. Its three primary services are ride-hailing, food delivery, and digital payments, where its estimated market share in Southeast Asia is 72%, 50%, and 23%, respectively, and they are categories leaders in each. Southeast Asia includes Singapore, Malaysia, Thailand, and Indonesia, The Philippines, and Vietnam.
Pandemic challenges
COVID-19 came in early 2020, and it's had a significant impact on Grab's growth. In 2019, ride-hailing (mobility) made up $5.7 billion of Grab's $12.2 billion in total GMV, almost half. Lockdowns and pandemic safety measures have suppressed ride-hailing activity. In 2020, GMV dropped to $3.2 billion.
Grab's mobility business continued struggling in 2021. Its GMV was down 30% year over year in the third quarter, signaling that ride-hailing activity is still declining. Management had noted activity was rebounding late in the quarter as more people in the region were vaccinated.
Valuation is skewed
Grab's mobility struggles are offsetting the company's otherwise-strong growth. Total GMV was up 32% year over year in 2021 Q3, despite mobility being down 30%. Analysts might be beginning to reflect the ongoing mobility struggles into future growth estimates, turning market sentiment against the stock.
Should you invest in Grab Holdings Limited right now?
SOURCE: https://www.fool.com/investing/2022/01/04/will-this-loser-spac-be-2022-winner-grab/
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