Why Grab Stock Is Rallying Today
Key Points
Delivery and mobility juggernaut Grab made a $60 million initial investment in on-demand car rental upstart Vay.
If certain milestones are met, Grab could add another $350 million.
Vay's use of human operators to remotely control their cars could help Grab's ambitions with autonomous vehicle training.
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Shares of leading delivery, mobility, and financial services app in Southeast Asia, Grab Holdings (NASDAQ: GRAB), rose 7% today as of 1 p.m. ET Monday, according to data provided by S&P Global Market Intelligence.
This rising share price stems from excitement surrounding Grab's initial investment of $60 million in German start-up Vay, which offers affordable, remote-controlled rental cars.
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In addition to this investment, Grab will be able to buy an additional $350 million worth of the company if additional joint milestones are met.
Image source: Getty Images.
What does this mean for Grab?
Currently, Vay operates only in Las Vegas -- a market Grab has no business exposure to yet. However, Vay's technology and processes fit in nicely with Grab's mobility (and perhaps autonomous vehicle) ambitions.
Vay's technology enables its vehicles to drive via remote control (by human operators) to and from customers, letting licensed drivers rent (and physically drive) a vehicle for around half the price of ride-hailing apps.
When the user gets to their location, the remote controller moves the car to the next customer, letting users not worry about car ownership itself or having to find a parking spot.
Following similar investments in robotaxi start-ups May Mobility (U.S.) and WeRide (China), Grab looks like it wants to get to autonomous vehicles as soon as possible -- and the market likes that notion.
Is Grab a buy?
Grab has grown sales by 17% annually over the last five years -- and 22% in its latest quarter -- and has reached breakeven profitability. Furthermore, it has a $5.2 billion net cash balance to help continue funding these acquisitions and fuel its growth ambitions.
However, at 136 times forward earnings (albeit with improving margins), interested investors may want to add in small portions over time.
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Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool recommends Grab. The Motley Fool has a disclosure policy.
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