Dara Khosroshahi, CEO of Uber, is speaking at the 2019 DealBook Conference in New York on November 6, 2019.
Samuel Quorum | DealBook
Investors are suddenly optimistic about Uber. The shares climbed more than 9% on Monday and were headed for their first time since June 2019 to go above their $ 45 IPO price a month after the company went public.
The move is showing a second straight quarter of earnings decline despite last week’s third income report, a further decline expected in the period, and a cumulative net loss of $ 5.8 billion for the year so far.
After Monday’s rally, drug makers Pfizer and BioNotech indicated that their Kovid-19 vaccine is more than 90% effective, raising optimism that demand for consumer services such as ride-sharing may return soon. Following last week’s jump of 34%, California’s passage of Proposition 22 increased profits, which would allow Uber to continue to be classified as its drivers rather than employees.
Lyft shares soared 22% on Monday after gaining 31% last week. However, Uber’s stock has erased the post-IPO losses and ultimately generated some profits for investors, with Lyft down nearly 50% from its first price since last year.
Uber and lift this year
The difference between companies is food delivery. Uber reported a partial decline in its main ride-sharing business this year through Uber Eats. That service reported gross booking growth of 134% in the third quarter, while Uber’s ride-haul category was sunk by 53%.
After a decrease of $ 232 million in the second quarter, the delivery business lost $ 183 million on an adjusted basis. Richard Kramer, an analyst at Artet Research, told CNBC in August that Uber was likely to “slip into a net debt position” next quarter due to its cash-burning rate.
Due to optimism
Uber and its supporters believe that the challenges to the pandemic are also improving the company’s profitable outlook.
Negative margins in the delivery business reached 16.1% in the third quarter, 26.2% in the second quarter, and 59.4% in the first quarter. Meanwhile, its positive adjusted margin in ride-sharing increased from 6.3% in the third quarter to 17.9% in the prior period, though still down from 23.5% in the first three months of the year.
Factors in those developments and then not looking at a very distant future include open bars and restaurants, some live events and office commuters coming and going, and at least a sensible one for investors to place bets on the company Is a story.
Guggenheim was quoted by analysts as saying, “Ultimately, we see the recovery of a ride as ‘not’ and now represent an upside source in 2021, from the widespread availability of the vaccine to travel / social-related rides Demand may increase. ” Report on the Friday before the latest update on vaccine development. They have a purchase recommendation on stock.
Canaccord Genuity’s analysts, who also have ratings, take a similar view. He wrote last week that, “Recovery trends and Kovid’s more optimistic outlook for vaccines, suggest the possibility that Uber’s mobility business is posting strong growth against the easy compass by mid-2021, suggesting That the stock may start functioning decisively. “
However, should the economy reopen in a way that resembles the pre-pandemic world, what does this mean for Uber Eats, which is growing rapidly because consumers are not going to restaurants?
As Esther Kramer said in August, “You either have people taking you to the restaurant or staying at home and ordering takeaways, but you’re not both at the same time.”
Add it all up and Uber still has to show that it can make money.
Watch: Uber’s delivery growth shows better path to profitability vs. mobility