Uber’s earnings: Postmortem on board as ‘story of two businesses’

Uber’s ride-hailing business has been greatly affected by the COVID-19 crisis. Investors will get a chance to see that the company’s food-distribution business has countered the trend when the company reports on Thursday.

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COVID-19 Epidemic Uber Technologies Inc. Disrupted K’s main ride-hailing business, the trip came to a standstill and there would be ridership from place to place, which could lead to thousands of layoffs, but there’s one potentially bright side for Uber: food delivery.

Uber Uber,
+ 3.07%
Uber operates Eats and has recently agreed to purchase Postmates, a rival delivery app. Uber’s second quarter is expected to report a huge increase in food deliveries due to ride-hailing flaws.

“If this trend of case activity continues and we are looking at more distracting periods as a result of the disruption, then it will be a story of two businesses,” Tom White was quoted as saying by an analyst. In an interview with DA Davidson & Company.

White said ride-hailing is slow at the moment, at least as the food-delivery business “maintains some sort of engagement with drivers and riders.” Customers use Uber Eats to order delivery from restaurants, many of which are not specifically allowed to accommodate home meals.

Uber’s delivery business will go through the $ 2.65 billion acquisition of Postmates, an app that allows customers to request delivery of groceries, alcohol and other items. The deal is expected to close in the first quarter of 2021, which will not immediately affect earnings, but could prove significant as the epidemic is no end in sight.

See: Uber bets on distribution with $ 2.65 billion acquisition of Postmates as ride-hailing stalls

During a call in early July to discuss the acquisition, Uber CEO Dara Khosroshahi – who said the company’s bribery business was “compensating for headwights” in its ride business – achieved market share and cost savings Spoke to

“You want to go anywhere, anything you want to bring to your home, Uber is going to be there with you,” he said.

According to Edison Trends, Uber Eats and Postmates together have a 37% market share in food delivery in the US. Dordash retained the largest industry share at 45%.

Due to the size of the postmates, White said “I’m not holding my breath” that buying it would have a significant impact on Uber’s bottom. But other analysts agree with Khosrowshahi and point to the possibility that the purchase will eventually pay off.

“The acquisition will allow Uber to expand into other verticals, bringing it
Deutsche Bank analysts said in a note that when people travel close to their vision of becoming the platform of choice, and also closer to the platform of choice, ”Deutsche Bank analysts said in a note to customers that when all The stock deal was announced.

One issue that could weigh in on Uber Eats in the second quarter and move forward: Some cities and counties have set up capitals on commissions that can charge delivery app restaurants, which already had low turnover during the coronovirus crisis Are hurt by

In the Bay Area – home to Uber and Postmates – cities that have delivery commissions in place include San Francisco, Oakland, Berkeley and Fremont. Other big cities such as Los Angeles and New York have done the same. Caps range from 15% to 20%.

For the Uber ride business, investors will know on Thursday how the booking went. Gross bookings for the ride in the first quarter were in January and February, but fell 39% in March compared to the same period last year as shelters started in place. Trips began to rebound after business began in April, Khosrowshahi said, during the company’s first-quarter earnings. Analysts expect gross bookings of the ride to fall by 66% from the first quarter to the second quarter.

But as US COVID-19 cases are on the rise, office workers continue to work from home and some infectious disease specialists call for a second lockdown, an approach to US ride-hailing – which RBC Capital Markets analysts Uber’s stock – identified as a significant risk to its rating – is uncertain. Analysts and investors are also paying attention to how rides are taking place in countries where businesses are returning to pre-epidemic levels.

In addition to the epidemic, Uber faces a myriad of regulatory issues. Most notably in the United States, the company is struggling with a new California law on worker classification of its drivers. The state company and its main rival Lyft Inc. Suing LYFT,
Not complying with Assembly Bill 5, which asks them to classify their drivers as employees rather than independent contractors. Uber and Lyft, along with Dordash and others, have committed $ 110 million in delinquency toward Proposition 22, which will go to California voting in November and exempt Gig-Economy companies from AB5. Companies are offering some concessions that will provide some vehicles. Benefits but declines to classify them as employees.

what to expect

Income: Analysts surveyed by FactSet expected Uber to lose 81 cents per share, or about $ 1.4 billion, compared to the company’s $ 5.2 billion loss in the same period last year. He expects an adjusted loss of 66 cents per share.

Revenue: Analysts on average expected revenue of $ 2.1 billion, compared to revenue of $ 3.16 billion in the year-ago quarter.

stock movement: Uber shares rose 4.9% during Monday’s trading session this year, while the S&P 500 index SPX,
+ 0.71%
Has risen 2%.

What are the analysts saying

Uber, which had lost money, promised to become profitable by the end of the year, but Khosrowshahi said during the last earnings call that the epidemic may take a few more quarters to reach that goal. Some analysts believe this may take longer.

“We continue to expect Uber to achieve an EBITDA break during 2021, but do not expect EBITDA profitability throughout the year until 2022,” RBC Capital Markets said in a note to customers.

Of the 36 analysts polled by FactSet, 28 have a buy rating on Uber stock, five say two overweight it and one says sell. The average price target was $ 41.32 as of Monday, when the stock closed at $ 31.19.

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