Just imagine if you got to bet on North American internet stocks Amazon or Uber when growth was much faster than today. Quite a steal, right?
Both Sea and Grab are in that phase for Southeast Asia.
The e-commerce market in the region is seen hitting $300 billion next year, almost doubling from 2021, according to Statista. North America is growing at half that pace. It’s the same trend for ride hailing too.
There’s investor love for these two as they’re mainly focused on the region and have the firepower to scale. Global giants, on the other hand, have struggled to keep up here: Uber exited Southeast Asia in 2018 after Grab bought its business. Alibaba’s Lazada has lagged Sea’s Shopee brand for years.
Analysts see Grab, a ride-hailing giant in the region, growing faster than US peers like Uber and Lyft. Its profits are expected to more than double between 2025 and 2026, with more bullish analysts projecting the stock will climb 45% over the next year.
Sea, an e-commerce powerhouse, has a similar profile. And that’s already driven the Shopee-owner’s shares up 200% this year. Analysts see another 30% rise in 2025.
Show me the money
Sea and Grab have turned profits in the past, but the returns haven’t been consistent and both stocks are far from their late 2021 peaks.
Both have made it clear over the last quarter, though, that profit is now the priority. Exactly what investors want to hear.
“A sharper focus on building reliable earnings from core areas will resonate with investors looking for sustainable growth,” David Materazzi, CEO of Galileo FX, told MONIIFY.
Let’s take a closer look.
Sea this
Sea’s e-commerce unit Shopee has been engaged in a fierce battle for online shopping dominance in Southeast Asia. The New York-listed Sea is going head-to-head with TikTok Shop by focusing on live streaming.
In September, Shopee teamed up with YouTube to introduce a feature that allows customers to make purchases by clicking on Shopee links embedded in YouTube videos.
It’s starting in Indonesia and expanding to Thailand and Vietnam — a direct response to TikTok Shop’s live-streaming hype. Shopee’s live-stream basket sizes have been growing too and Sea has improved monetization from commissions and advertising take rates, which is driving profit.
And Grab?
The ride-hailing platform has everyone buzzing with new user-specific options, like budget-friendly ‘Saver’ and premium ‘Priority’ services, which are driving up transactions and revenue.
Beyond hitting profitability targets, the company is super tuned in to the vibe of each local market, which gives it a long-term edge that’s tough for new ride-hailing or food delivery apps to match. It’s a regional champion for sure.
What’s next for Grab? It needs to stay laser-focused on cutting cash burn. It’s already cut its workforce by 11% and reduced all sorts of expenditure including its cloud bill as it looks to focus on high-margin markets.
It may need to pull back on pricey incentives and promos but double down on areas where it can flex some pricing power— like its financial services.
It performed well in the third quarter and has revised its 2024 revenue forecast to a range of $2.76 billion to $2.78 billion, up from its previous projection of $2.70 billion to $2.75 billion.
“The projected growth for Grab looks realistic and sustainable because the company is focused on the right strategies,” says Jeffrey Bahar, COO of Yamada Consulting & Spire.
Long way up
Both companies still have a long way to go to reclaim their peaks.
Though it’s a market leader, Grab is facing stiff competition in a crowded market. The fact that it went public through a SPAC with an initial valuation that now seems overly optimistic… that still makes investors nervous, Materazzi says.
For Sea, the investment needed to grow its e-commerce business is huge. And there’s no guarantee it will work.
“The market is willing to reward growth, but only when it’s coupled with predictable and sustainable profits,” Materazzi says. “So, without those, reaching those peaks will be a tough climb.”
Zoom out though, and the overall picture is different. The growth potential in emerging regions where internet services are still not widespread provides enormous opportunity.
For such investments, timing is everything.
