Grab Holdings (NASDAQ: GRAB) received a major boost from J.P. Morgan, which upgraded the stock to Overweight from Neutral, citing strong earnings potential, improved cost management, and accelerating ad revenue growth.
Why J.P. Morgan Upgraded Grab Holdings
J.P. Morgan analyst Ranjan Sharma expects Grab’s FY25 adjusted EBITDA guidance to be conservative, with the potential for upward EPS revisions as the company has a track record of outperforming its initial yearly guidance.
Key Growth Drivers for Grab Holdings
1. Cost Management and Platform Growth
- Improved cost efficiencies should not only boost earnings growth but also enhance platform health by making services more affordable.
- Expanding Monthly Transacting Users (MTU) across Southeast Asia presents long-term earnings potential as Grab taps into a larger untapped market.
2. Advertising Revenue Surge
- Advertising is emerging as a key revenue and margin driver for Grab.
- Ad revenue reached 1.7% of deliveries GMV in Q4 2024, up from 1.4% in the prior year.
- The number of active advertisers on Grab’s self-serve platform increased by 63% YoY, with 21% higher ad spend per advertiser.
3. Strong Return on Ad Spend (ROAS) and Merchant Retention
- Grab reports a 5-8x return on ad sales (ROAS), making it an attractive platform for advertisers.
- Merchant retention remains high at ~75%, indicating sustained engagement and loyalty.
- Deeper ad penetration is expected to support delivery revenue and margin expansion.
What’s Next for Grab?
With J.P. Morgan’s bullish outlook and Grab’s strong momentum in earnings, cost efficiency, and advertising growth, investors are watching closely as the company positions itself for further expansion in Southeast Asia.
