Grab stock price crashed after it released a financial report on Mar. 3 on its performance for the whole year of 2021, as well as for the fourth quarter.
The report revealed that the company — which went public in December 2021 — saw a 44 per cent drop in revenue in the fourth quarter of 2021, due to spending on driver and consumer incentives.
After the report was released, Grab Holdings shares plummeted 37 per cent.
Drop in revenue due to investment in incentives
Grab's revenue for the fourth quarter of 2021 was US$122 million, a 44 per cent year-on-year drop.
Reuters reported that according to Refinitiv data, the average analyst estimate for Grab's Q4 revenue had been US$167 million.
Grab attributed this decline to the company's decision to "preemptively" invest to grow the supply of drivers, as well as an increase in consumer incentives for mobility and deliveries.
Specifically for Grab's delivery segment, the fourth quarter revenue dropped a whopping 98 per cent to US$1 million, due to Grab's investment in incentives to maintain its position as market leader.
The Q4 revenue for Grab's mobility sector was US$105 million, a 27 per cent year-on-year drop.
Grab attributed this decrease to "invest[ing] in driver incentives to bolster driver supply to capture strong recovery" and an increase in mobility consumer incentive levels.
Grab said in Singapore, it "retained a comfortable lead" in category share for mobility, estimating that the company spend four times less on promotions per ride in the fourth quarter than a competitor.
"2021 was our strongest year yet": Grab Group CEO
Despite the sharp drop in Q4 revenue, Grab Group CEO and co-founder of Grab Anthony Tan celebrated the company's successes in 2021:
"2021 was our strongest year yet, even as we faced tougher conditions with the Delta and Omicron variants."
He said the company managed to achieve "outsized growth" in both gross merchandise value (GMV) and revenue.
GMV for 2021 was US$16.1 million, a 29 per cent year-on-year increase and a "record year for Grab".
Total revenue for 2021 was US$675 million, an increase of 44 per cent year-on-year.
For the delivery sector in particular, the annual revenue jumped from US$5 million in 2020 to US$148 million in 2021.
Grab reported that there were an average of 24.1 million monthly transacting users in 2021, with 27.7 million in December 2021.
The average spend per user was US$666, a 31 per cent increase, which Grab said "reflect[s] greater loyalty and an increasingly entrenched user base".
Grab performing much worse than expected: experts
Despite the increase in user spending, though, Bloomberg reported that the growth is not yet translating into earnings for Grab, as it deducts incentives offered to drivers and consumers from the sales.
According to Bloomberg, Grab spent a total of US$583.5 million on incentives in the fourth quarter of 2021.
Shifara Samsudeen, an analyst at LightStream Research, said in a research report: "We did not expect Grab to spend on such huge incentives."
She added that this implies that Grab is "struggling to grow its business" and that profitability seems to be a "tall order", Bloomberg wrote.
In Q4 of 2021, Grab's net loss amounted to US$1.1 billion, compared to a loss of US$635 million in 2021, according to Reuters.
Around 10am on Friday (Mar. 4) morning, Grab's market value was only about US$12 billion, as compared to the US$40 billion it was valued at in December, Bloomberg reporter Yoolim Lee shared.
Bloomberg also added that Grab's mounting losses have "led investors to flee the stock", and that Grab was the worst performer in the De-SPAC Index on Thursday.
Grab's projections for 2022
Grab said it expects the following for the first quarter of 2022:
- Deliveries GMV to be between US$2.4 billion to US$2.5 billion (Q4 of 2021 hit a record high of US$2.4 billion)
- Mobility GMV to be between US$750 million to US$800 million (Q4 of 2021 was US$765 million)
- Financial Services Pre-InterCo Total Payments Volume to be between US$3.1 billion to US$3.2 billion (Q4 of 2021 was US$3.4 billion)
Grab also expects that GMV growth for each of the subsequent quarters in 2022 to accelerate to 30 to 35 per cent year-on-year, subject to shifts relating to the Covid-19 pandemic.
Follow and listen to our podcast here
Top photo by Zheng Zhangxin and via NASDAQ.