Uber $UBER is to report earnings today, Thursday 7th of May, after the market closes. Here's what to expect and what we should be looking for:
Uber is a fast growing company with revenues growing by 63% per year on average since 2015 but the company has never had a profitable year and according to the CEO, "may never make a profit" but the situation for the company has been improving since its IPO about a year ago.
The main business of Uber, Ride Sharing has been most certainly hit by this pandemic and recession. In 2019, ride sharing was 82% of the total revenues and was the only profitable segment. With this segment affected, we cannot expect much for the revenues and profits of Uber. However, we need to be careful as they revenues and net loss might be better than expected like it happened with Lyft. It is all because of timing. These earnings are for the quarter from January to March 2020 and the real negative impact of the pandemic happened in Europe and America happened in March and April. The massive losses that we are expecting might actually be reported in the next earnings.
The good news for Uber is that more people are now using Uber Eats. Uber Eats was about 11% of the revenues in 2019 but it lost a lot of money with a net loss margin of almost 100%. It is unlikely that they were able to make this business profitable this quarter. Yesterday, Uber laid off about 14% of its workforce, about 3700 people. Uber drivers do not count as Uber employees but there are certainly much more than 3700 job losses related to Uber. These 3700 official job losses will lower the expenses of Uber in the short-term but it won't be business as usual for Uber unless people get out again and this is not happening anytime soon.
As far as the balance sheet is concerned, Uber has a good balance sheet and they will be able to return back to business without any problem once all of this is over.
Let's talk valuations, $50 billion for a company which may never be profitable. I find it too expensive. That's more than the market cap of Barrick Gold, the largest gold miner. They may be promising us great things such as flying taxis but these are only promises. Only once they can actually deliver these products, then we can pay for them. Gold is real but flying taxis are only promises. We need to discount such future promises. Right now, I don't see myself paying $50 billion for the current business. You can find a full analysis of Uber on my research partnership: https://ishfaaqpeerally.teachable.com/courses/662813/lectures/12562041 Here's my last YouTube video on Uber: https://www.youtube.com/watch?v=Fc_4t-r3_SI Join my private investing group on Facebook for more: https://www.facebook.com/groups/IshfaaqInvesting/ Follow or copy my investments on eToro: https://www.etoro.com/people/ishfaaqpeerally