Uber Share Price (UBER): Is It On Track To Become Profitable?

Uber Technologies' share price has increased nearly 16% in the past 5 days. Despite the recent rally, Uber's share price has fallen by 28% in 2022. Let us look at what is happening with the Uber share price and what investors should do.

Uber Share Price History

Uber Third Quarter Results

Let us first look at Uber's September quarter numbers. The company reported a revenue of $8.34 billion, a growth of 72% YoY and above street estimates for the September quarter. However, the company reported a net loss of $1.2 billion, despite the revenue growth. The Adjusted EBITDA was $516 million, while gross booking for the quarter came at $29.1 billion, up 26% YoY. You can check the detailed results and what analysts' said post the results here.

Uber Financial Condition: Is It Growing?

Uber's monthly active-platform consumers (MAPCs) increased 14% YoY to 124 million in the third quarter. Its total trips increased to 1.95 billion, a growth of 19%. The gross booking or the total value of all services booked on Uber's platform jumped 26% to $29.12 billion.

Uber's revenue growth in 2022 was notably inflated by Uber Freight's acquisition of Transplace last November and a court-mandated change to its U.K. Mobility business last December, which transformed it into an official transportation-services provider, and forced it to report all of its bookings as revenue.

Uber Business Segments: Core Business is Back

Uber was doing perfectly well before the pandemic. The ride-hailing business was severely impacted because of social restrictions and lockdowns. 

Uber's business is divided into three segments - mobility, freight, and delivery. The delivery segment saved the company during the pandemic. Uber shifted its focus to food delivery with its UberEats platform post-pandemic. For the segment, the revenue is still growing, but experts believe that food delivery is here to stay. The freight business is also doing great - though it is the company's smallest segment. It is growing at an exponential pace.

However, the company's growth and share price upward movement will largely be driven by its mobility business, and in recent quarters, it experienced an explosive resurgence in its mobility segment. It is expected to do better in coming quarters and for this reason, we have seen the recent rally in the stock price.

Uber Share Price Valuation

Even after Uber's exceptional revenue growth in recent years, the company is not profitable at this time. As per estimates, the losses are expected again next year with earning per share (EPS) projections of a loss of 21 cents, approximately. The company does not pay a dividend and has no plans in the near future.

Tiger Global Invests in Uber

Investment firm Tiger Global Management raised its stake in Uber Technologies Inc in the last quarter. It added 9.3 million new shares of Uber, or nearly $272 million.

Uber Share Price: Should You Buy Now?

It was in 2015 that Uber was valued at $51 billion. A company that was yet to turn profitable was valued more than FedEx and American Airlines, two companies that actually showed profits. A lot has happened to Uber since then. 

In 2017, its founder Travis Kalanick stepped down as the CEO after several internal investigations were mounted against him. In 2019, the company went public, which was seen as a massive flop (The share price cratered 34% on the first day of its IPO). And then came the pandemic in 2020. The company’s disruptive ride-sharing business needed a relook as people were largely confined to their homes, not risking sharing any cabs to go somewhere. As a result, Uber Eats came into existence. 

Uber Eats is categorized under the delivery segment and was key in sustaining the company through the tumultuous period. As of now, the company’s business is split into 3 segments: delivery, mobility and freight. The latter segment basically connects carriers to shippers, just like how its mobility segment connects riders to drivers, on its platform. 

The mobility segment had jumped by 73% in the third quarter compared to the previous year even as its delivery business increased by 24% in the same period. The freight segment added $1.75 billion in revenues (it grew by a whopping 336% in Q3), however, the company forecasts that the segment might experience slow growth due to low shipping volumes anticipated in 2023. 

Is it inching toward profitability?

The company reported a net loss of $1.2 billion in the third quarter. However, let’s look at an earnings metric that could give comfort to investors of Uber: Adjusted EBITDA. Essentially, it represents earnings minus the various non-cash expenses and other items. 

The adjusted EBITDA in the third quarter was $516 million. This is a huge jump from just $8 million in the third quarter of 2019. The company looks to stay within the range of $600 million to $630 million in the fourth quarter of this year. Also, an interesting point to note is that its delivery business which was losing about 50 cents for every dollar in revenue is now earning more than 6 cents three years later.

All the above reasons led its share price to rally 11% post its third-quarter earnings results.

Now let’s come to another key trend that you must know.

(Source: Uber Earnings)

As you would have read earlier, its gross bookings (measures the amount people are willing to pay for a ride or food delivery for instance) value jumped by 26% in the third quarter while the monthly active platform consumers (MAPC) grew by 14% in the same quarter. This is good news as it essentially shows that people are willing to spend more on the platform than they would have (We inferred this as the value of the gross bookings rose more than the MAPC). 

(Source: Uber Earnings)

So in short, there is a case for being optimistic about the company in the near term. Also, its $1.2 billion loss was not entirely due to operations, only $212 million loss was due to its core operations, and the remaining $994 million was due to a reduction in the value of its equity investments and stock-based compensation expenses which was set off against the net income.

Future Plans

The company launched the “Go, Get” product portfolio in its global product event earlier this year. Uber’s main aim is to create a loop that lets customers wade through different products of Uber and back. It is simple, customers can book a table in a restaurant using OpenTable or book a holiday tour through Viator, all inside the Uber app and if anything is to be delivered in between, Uber would do it. It has now gone a step further with “Go, Get and Gift” in order to woo customers this holiday season. (Users can gift Uber gift cards in advance to their loved ones through the app, which shall be delivered by Uber).

According to its CEO, the company looks to develop customer stickiness through active cross-selling of various products on its platforms. (the inference made above with regard to higher growth in gross bookings compared to active users can help here)

Furthermore, the firm now looks to tap into the advertisements business that it launched very recently in the coming periods. Uber looks to make way for advertisements in its ride-hailing and Uber Eats apps as well as in-vehicle advertisements.

Will the company become profitable in a couple of quarters? This is something that we have to wait and watch. However, there are positive signals, to say the least. Let’s look at what analysts are saying.

We had written about certain bottlenecks for various US tech companies in general in this blog here. Don't miss!

Uber Share Price Target: Analysts' Call

Oppenheimer: The firm raised the Uber share target price to $45 from an earlier target of $42 per share. It said that Uber continues to execute on marketplace improvements, profitability, and growth, despite weakening macroeconomics in Europe. Even with 160 basis points of additional FX headwinds causing bookings to come in 2% below the Street forecast, Uber again delivered strong EBITDA, 13% above Street on a platform scale, and improved take-rate, guiding 4Q EBITDA 8% above Street.

Wedbush: Its analysts gave an outperforming rating with a target price of $38 price share. It sees Uber beating the Street and posting strong guidance despite recent regulatory headwinds adding more uncertainty.

Needham: It raised Uber Technologies' target from $52 to $54. Its analysts' maintained the stock with a Buy rating.