Sam Boughedda

Grab Holdings Ltd (NASDAQ:) shares rose over 4% Tuesday after it was upgraded to Outperform from Market Perform by Bernstein analyst Venugopal Garre.

Grab developed the Grab Superapp which offers transportation and food delivery as well as digital payment services.

Investors were informed by the analyst that the price target for the stock was reduced to $3.04, from $3.52.

Garre stated that, despite the stock’s recent decline of 18% over the last month, the analysts see a favorable risk-reward ratio with the company as a beneficiary from the post-pandemic recovery.

Analyst wrote that the upgrade “primarily reflects favorable risk-reward and improving momentum Ride-hailing which will offset moderation in food and potential long-term benefit from Fintech and Grocery.”

“We anticipate a peak in incentive levels within 1H, and gradually improving post that period as the driver supply improves. Additional support is provided by a more benign environment in which competitors place emphasis on profitability.

Although acknowledging that food delivery is still difficult following the pandemic, there are many factors to consider. The analysts believe the Philippines, Singapore and Indonesia will ease their travel restrictions in March. Malaysian and Thai travel restrictions will then be lifted in April.

The reopening of ride-hailing services will be a benefit. However, the scaling-up may not be linear as the demand for mobility increases and prices fall with increased driver supply. Garre said that, although driver supply and fuel issues will remain in the short term, this can be reflected in valuations.