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Do Not Buy the Dip: Grab Holdings and Wayfair

The stock market has suffered massive selloffs of late on growing worries about logistical disruptions, rising energy prices, galloping inflation, and forthcoming federal interest rate hikes. While stock price dips can offer attractive entry points to quality names, we think it could be wise to avoid fundamentally weak Grab Holdings (GRAB) and Wayfair (W), which look significantly overvalued at the current price levels. Read on.

Worsening logistical disruptions due to the Russia-Ukraine war and extended COVID-19 lockdowns in China have exacerbated worries about inflation. Concerns over imminent, aggressive federal interest rate increases to tame high inflation have dampened investor sentiment, as evidenced by the SPDR S&P 500 Trust ETF’s (SPY) 9.8% year-to-date decline.

While the recent market selloffs have led to many quality stocks trading at attractive prices, investors must exercise caution and avoid significantly overvalued and financially weak stocks despite their price dips. According to Morgan Stanley equity strategists, investors have "very few places to hide" in markets right now.

Even in the absence of requisite fundamental strength, shares of Grab Holdings Limited (GRAB) and Wayfair Inc. (W) are currently trading at premiums versus their peers. Given the possibility of a further pullback, we think these stocks are best avoided now.

Grab Holdings Limited (GRAB)

Based in Singapore, GRAB operates a transportation and fintech platform in Southeast Asia. It offers a range of services, including mobility, food, package and grocery delivery services, mobile payments, and financial services.

On April 19, 2022, Bernstein Liebhard LLP reminded investors of the deadline to file a lead plaintiff motion in a securities class action lawsuit filed on behalf of investors who purchased or acquired GRAB’s securities. This lawsuit, which alleges violations of the Securities Exchange Act of 1934, might disrupt the company’s optimal business output .

GRAB’s revenue has decreased 44.3% year-over-year to $122 million for the fourth quarter, ended Dec. 31, 2021. Its loss for the period came in at $1.10 billion, versus a $635 million loss in the year-ago period. Furthermore, its operating loss came in at $557 million compared to a $234 million loss in the prior-year period.

In terms of forward EV/S, GRAB’s 13.83x is 710.1% higher than the 1.71x industry average. Furthermore, its 11.56x forward P/S is 754.7% higher than the 1.35x industry average.

GRAB’s EPS is estimated to remain negative in 2022 and 2023. Over the past five days, GRAB has declined  15.6% in price to close yesterday’s trading session at $2.86.

GRAB’s POWR Ratings reflect its poor prospects. It has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

The stock has a D grade for Sentiment and Quality. Click here to access the additional POWR Ratings for GRAB (Growth, Value, Momentum, and Stability). GRAB is ranked last in the Foreign Consumer Finance industry.

Wayfair Inc. (W)

Boston-based W is in the e-commerce business in the United States and internationally. The company provides approximately thirty-three million products for the home sector under various brands. It offers online selections of furniture, décor, housewares, and home improvement products.

W’s net revenue decreased 11.4% year-over-year to $3.25 billion for the fourth quarter, ended Dec. 31, 2021. Its net loss came in at $202 million, compared to $24 million in net income in the previous period. Also, the company’s loss per share came in at $1.92, compared to an EPS of $0.23 in the year-ago period.

In terms of forward EV/EBITDA, W’s 550.60x is significantly higher than the 8.62x industry average.

W’s EPS is estimated to decrease 238.8% in 2022. In addition, its EPS is expected to remain negative in 2022 and 2023. Over the past five days, the stock has declined 21.3% in price to close yesterday’s trading session at $83.93.

W has an overall grade of D, which equates to Sell in our POWR Ratings system. It has an F grade for Growth and Sentiment and a D grade for Stability. Click here to access all the W ratings (Value, Momentum, and Quality). W is ranked #43 of 46 stocks in the Specialty Retailers industry.

Click here to checkout our Retail Industry Report for 2022

GRAB shares were trading at $2.71 per share on Tuesday afternoon, down $0.15 (-5.24%). Year-to-date, GRAB has declined -61.99%, versus a -11.42% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.


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