What happened

Grab (GRAB -0.88%) stock plummeted by 14.9% Thursday, according to data from S&P Global Market Intelligence, following the release of a mixed first-quarter report.

While sales and earnings came in ahead of the market's expectations, the Singapore-based ride-hailing and delivery company's gross merchandise volume (GMV) came in lower than anticipated. GMV grew just 3% year over year in the quarter, and concerns that the platform is losing momentum sent the stock tumbling. 

So what

Grab posted a loss of $0.06 per share on revenue of $525 million, while the average analyst estimate had called for a  loss of $0.07 per share on revenue of $505 million. However, though sales grew by roughly 130% year over year, the market mostly appears to have focused on the company's relatively weak GMV growth.

After it grew gross merchandise volume by 24% in 2022 and 11% year over year in the fourth quarter, Grab's 3% GMV growth in the first quarter was disappointing. While the company posted strong revenue growth in the quarter, investors may be interpreting that as a lagging indicator, and the business could have trouble increasing sales at that level if it can't deliver stronger GMV growth.  

Now what

For the year, Grab is guiding for sales of $2.2 billion to $2.3 billion, suggesting annual growth of roughly 57% at the midpoint of the range. And while the midpoint of that guidance range did come in ahead of the consensus forecast, it's not surprising that the market reacted negatively to the Q1 report. 

Right now, Grab has two main ways of increasing sales: boosting the GMV conducted through its food-delivery and ride-hailing platform, and increasing the fees that it collects for facilitating transactions. Competition in the company's core service categories continues to intensify, and there are limits to the transaction fees that it can impose on the users of its platform. If gross merchandise volume isn't growing at a healthy pace, that suggests that the business is losing ground in its market, which bodes poorly for Grab's long-term growth potential even if sales growth looks quite strong right now.