JPMorgan has maintained its Overweight rating and $5.60 price target for Grab Holdings (NASDAQ: GRAB), following recent news that the company is considering a takeover of its rival, GoTo Group. The potential deal could value GoTo at over $7 billion and may help Grab address the growing competition in Southeast Asia’s internet market.
The merger discussions have gained attention, with analysts like Alicia Yap from Citi noting that the deal could lead to significant cost savings and reduce competitive pressures. This, in turn, could improve Grab’s profitability outlook.
JPMorgan analysts note that while a merger could initially dilute Grab’s earnings, there is considerable potential for cost synergies. These include rationalizing incentives and streamlining corporate costs, which could enhance earnings over time. Such synergies might theoretically justify the reported offer premium for GoTo Group.
However, JPMorgan also highlights a potential downside: reducing incentives may negatively affect Grab’s Gross Merchandise Volume (GMV) growth, which could, in turn, impact the overall synergies expected from the merger.
As of now, Grab hasn’t made any official comments on the merger discussions, while GoTo Group has outright denied the claims made in recent reports.
In other news, HSBC upgraded its rating on Grab Holdings (NASDAQ: GRAB) from Hold to Buy, slightly adjusting its price target down to $5.45 from $5.50.
Meanwhile, Jefferies has maintained its Buy rating with a price target of $5.10, expecting Grab to meet its revenue and adjusted EBITDA targets for Q4, driven by growth in its user base and a diversified service offering. Grab’s delivery and financial services segments are expected to contribute significantly to its long-term profitability.
On the other hand, BofA Securities has shifted its stance on Grab from Underperform to Neutral, raising the price target to $5.10. The move follows a 15% decline in Grab stock from its recent high. BofA expects slower improvements in EBITDA margins within Grab’s delivery business as the company strives for a balance between growth and profitability.
