Intense competition drags down performance, GrabQ2 revenue falls short of expectations
Due to intense competition in the Southeast Asian market, Grab's revenue in the second quarter fell short of expectations, leading to a pre-market drop of about 10% in US stocks. The company's revenue grew by 17% to reach $664 million, below analysts' expectations of $676.9 million. Net losses narrowed to $53 million. Despite increasing market challenges and pressure from competitor GoTo Group, Grab still believes it is attracting more users and will focus on achieving profitability in the future. Since its IPO, the stock price has fallen by 69%, but recent performance has been better than its main competitors
According to the financial news app Zhitong Finance, due to intense competition in the Southeast Asian market, the region's largest ride-hailing company Grab (GRAB.US) reported lower-than-expected revenue in the second quarter, leading to a nearly 10% drop in the stock price before the U.S. market opened on Thursday.
The company stated that in the three months ending in June, revenue increased by 17% to $664 million, falling short of the analysts' average forecast of $676.9 million. Adjusted EBITDA was $64 million, which is in line with market expectations.
Grab is the largest ride-hailing and delivery company in Southeast Asia, and the company is trying to prove that its aggressive cost-cutting measures are paying off. After years of increasing market share and fending off competition, the company is now focusing on profitability. However, Indonesian group GoTo has emerged as a strong competitor, with both companies maintaining low prices and thin profit margins in the Southeast Asian market with a population of 675 million.
The growth rate of this Uber-backed company has slowed down from the triple digits of the past few years, as customers in the region are curbing spending to cope with rising inflation and interest rates. With the expansion of Grab's customer base, the growth rate of demand is slowing down, as consumers are less willing to order rides or food delivery in a challenging macroeconomic environment.
Grab's CFO Peter Oey said in an interview, "For us, this performance is not below expectations. We are attracting more users to use the platform. We have also launched more new products."
Once one of the hottest startups in Southeast Asia, Grab's stock price has fallen by 69% since going public through a U.S. blank-check company at the end of 2021. Nevertheless, as losses narrow, the company's stock price has stabilized this year, outperforming its main regional competitors.
In the second quarter, the company's net loss narrowed from $135 million in the same period last year to $53 million. Grab has not set a specific timeline for achieving profitability, but this will be the company's next important goal to prove to investors that it can make money.
"In the 2024 fiscal year, we will achieve positive free cash flow, which will be an important milestone for us," Oey said. "The next milestone for us is to achieve positive net profit."
Bloomberg Intelligence analyst Nathan Naidu said, "Grab's investments, such as its partnership with online travel agency Trip.com (TCOM.US), should allow Grab to continue to attract tourists, especially from China, who are taking advantage of visa-free travel opportunities, amid the recovery of the Southeast Asian tourism industry. Additionally, as Malaysia's digital banking expands further, the expansion of loan books should boost its fintech sales, helping it withstand the normalization of food delivery sales and drive group revenue growth." ”