Shares of Southeast Asian mobility super-app Grab (GRAB 5.03%) plunged on Tuesday, falling 7.7% as of 1:10 p.m. ET.
Grab is a leader across Southeast Asia in mobility, delivery, and digital financial services. And while today's third-quarter earnings report was actually fairly strong, it apparently wasn't enough for investors after a strong year for the stock.
In addition, tech stocks were broadly under pressure today, as investors took profits across most artificial intelligence (AI) stocks and the tech sector generally.
NASDAQ: GRAB
Key Data Points
Grab delivers, but not enough
In the third quarter, Grab grew revenue 21.9%, beating expectations, while earnings per share of $0.01 only matched expectations and last year's figure. While the bottom line didn't beat, Grab is a growth stock for which investors likely don't mind foregoing near-term profits for long-term growth. Meanwhile, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rallied 51% to $136 million.
So the numbers on the surface looked great, with Grab continuing to grow customers, revenue per customer, and EBITDA profit margins. Still, management only raised the lower end of its full-year guidance while keeping the top end of the range the same, to a range of $3.38 billion to $3.4 billion, up from $3.33 billion to $3.4 billion prior. That may have been disappointing. However, management did raise its full-year EBITDA guidance range, from $460 million to $480 million to a new range of $490 million to $500 million.
So, the sell-off is a bit of a head-scratcher. Investors may have hoped for more, as the stock had already appreciated roughly 28% this year before today's earnings release. Moreover, yesterday's valuation didn't look especially "cheap," at over 8 times sales and over 53 times next year's earnings estimates.
Image source: Getty Images.
Time to grab Grab for your portfolio?
Grab may be an interesting play on this pullback for investors looking for international stocks outside the U.S. Management appears to be executing well, and the Southeast Asian economies appear to have promising growth prospects.
Moreover, Grab has roughly $5.3 billion in net cash on its balance sheet, making up over 23% of the company's market cap. That gives Grab some safety and "dry powder" to deploy for future opportunities, which also makes the stock cheaper than it may seem at first glance.
