What happened
Shares of Grab Holdings (GRAB -0.59%) were slumping last month, as the Southeast Asian ridesharing company got swept up in the tech sell-off. There was little direct news out on the company in April, but the stock fits the profile of the high-growth, unprofitable companies that investors are shifting away from.
According to data from S&P Global Market Intelligence, the stock finished the month down 16%. As you can see from the chart below, the stock mostly tracked with the Nasdaq over the course of the month.
So what
Tech stocks continued to swoon last month as investors reacted to rising interest rates, high inflation, and fears of a recession. After the tech sector generally rallied during the pandemic, valuations have come crashing down in recent months, as the market has become suspect that companies like Grab will ever be profitable. Peers Uber and Lyft also fell by double digits last month.
Image source: Getty Images.
Grab hasn't reported first-quarter earnings yet, but in its fourth-quarter report, gross merchandise volume increased 26% to $4.5 billion. Revenue, however, fell 44% as the company spent aggressively on driver incentives, lowering its take rate. It also posted an adjusted EBITDA loss of $305 million.
In other words, Grab is exactly the type of stock that investors are turning away from as they lose confidence that companies like this can be profitable.
Toward the end of the month, the stock rebounded modestly when it was selected to receive a digital banking license in Malaysia, giving a boost to its digital payments business, as Grab is moving beyond the ride-hailing business to be a "superapp" that also does delivery and digital banking.
Now what
Grab has fallen another 5% in May, but that's actually better than many of its tech stock peers, and it also held steady when Uber and Lyft were crashing on earnings last week.
The company will report first-quarter earnings on May 19, though analyst estimates are not available. Given the shifting market sentiment, investors will want to see Grab make progress on narrowing its EBITDA loss. In addition, spending heavily on driver incentives could also weigh on the stock once again.
Grab shares are down more than 80% from their peak last November, but with a price-to-sales ratio of 15 and wide losses, the stock could sink even lower if it doesn't make progress toward profitability.