Do you see the stock market as a glass half empty or a glass half full?
Even as the stock market continues to seesaw, some Syfe Trade investors are choosing to view current conditions as an opportunity to trade quality stocks at a bargain.
Grab (GRAB) and Sea (SE) were among the top 5 most traded stocks on Syfe Trade last week while NIO (NIO) saw a surge in trading interest from our customers. The jump in popularity propelled NIO to our top 20 most traded.
Here’s what to know.
Shares of ride-hailing and food-delivery company Grab plunged almost 40% last Thursday after the firm reported disappointing earnings.
The company reported a net loss of US$1.1 billion for the fourth quarter of 2021. This figure is almost double the US$635 million loss in Q4 2020. However, US$328 million of the recent quarter’s loss came from expenses related to its public listing last year. Although this amount is massive, it’s a one-off expense.
Revenue for the period fell 44% to $122 million largely due to higher incentives given out to drivers and consumers to boost usage and retain market share. Grab is facing stiff competition from GoTo (formed after the merger between ride-hailing firm GoJek and e-commerce platform Tokopedia) and Sea (which entered the food delivery space in Indonesia and Malaysia last year).
Grab has four core businesses:
- Mobility (ride-hailing)
- Deliveries (food, groceries)
- Financial services (payments, rewards, lending, insurance)
- Enterprise (advertising under GrabAds, and an online fraud and risk detection service under GrabDefence)
That said, the incentives did boost Grab’s gross merchandise value (GMV). GMV reflects the total spending on Grab’s platform. GMV for 2021 rose 29% year-over-year, led by the deliveries and financial services segment.
Overall, analysts think the sell-off may be overdone. “We believe the 30% sell-off in share price is unwarranted,” Citigroup analysts said in a note.
Based on stock data shown on Syfe Trade, the average price target on Grab’s share price is currently $6.90.
Grab predicts it would break even on an adjusted EBITDA basis in its food delivery segment by the first half of 2023. According to Euromonitor data, Grab remained the category leader in online food delivery last year, despite increased competition.
The company is focusing on online grocery delivery as well. Euromonitor analysts expect the segment to grow at a compound annual growth rate of 24% over the next five years. To that end, Grab recently acquired a majority stake in Jaya Grocer, a profitable supermarket chain in Malaysia. The acquisition should help Grab scale its grocery delivery service.
Sea was one of the most popular stocks in 2021. Last October, its share price even reached a high of $355. In the subsequent months however, its stock price started to slide. This was exacerbated by Tencent trimming its stake in Sea in January 2022 and India banning Free Fire in February. Free Fire is one of Sea’s most popular games, and the most downloaded battle royale mobile game in 2021.
At this time of writing, Sea is trading slightly under $100.
Sea has three core businesses: Gaming (Garena), e-commerce (Shoppee), and financial services (SeaMoney).
In its fourth-quarter 2021 earnings report, Sea delivered positive revenue beats across its core segments. However, the company cautioned about a slowdown in gaming growth for the year ahead. As the COVID-19 situation eases, management expects lower bookings of 35% for Garena in 2022. Bookings is a common measure for gaming companies.
Garena is the only profitable business segment at Sea. Cash flow from the unit is used to support other segments. Still, the company expects Shopee and SeaMoney to continue their expansion paths. Both platforms are highly synergistic with each other and enjoy a robust flywheel effect where user growth in one platform can boost revenue in the other.
Sea noted in its quarterly earnings that Shopee was the top ranked app in the Shopping category globally in 2021. Additionally, SeaMoney is expected to achieve positive cash flow by 2023. Management has provided 2022 guidance of 75% revenue growth for its e-commerce segment and 155% revenue growth for financial services.
According to stock data shown on Syfe Trade, the average price target on Sea’s share price is currently $216.84.
NIO’s share price has tumbled in recent months, in line with the broader slump across the tech sector. This was exacerbated by the company’s vehicle delivery numbers for February, which showed a marked growth slowdown from January’s figures.
Recently, NIO’s share price has shown signs of recovery. Rising oil prices means that petrol prices are becoming more expensive. This is a boon for electric vehicle (EV) companies like NIO as consumers turn their attention to electric cars.
NIO’s announcement that it’s planning to list on the Hong Kong Stock Exchange also sent its share price higher.
From a longer-term perspective, potential tailwinds for NIO could include the launch of its electric sedans later in 2022. Its ET5 model is said to rival Tesla’s popular Model 3, and the car is NIO’s highest pre-order model so far.
NIO has announced plans to enter Germany, Netherlands, Denmark, and Sweden in 2022 too, having expanded to Norway last year. More details of the company’s expansion strategy will likely be revealed when it releases its fourth quarter 2021 earnings report at the end of March.
Nonetheless, EV investors should keep an eye on supply chain constraints, which could cause EV makers to miss their production or delivery timelines. Regulatory pressure on Chinese companies listed on US stock exchanges will be another risk to take note of.
Based on stock data shown on Syfe Trade, the average price target on NIO’s share price is $52.31.
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