With the ride-hailing recovery rolling along, Uber Technologies Inc. is looking to bolster some of its other businesses.
Delivery has been a bright spot as ride-hailing struggled to rebound during the COVID-19 pandemic, and Uber
sought to boost its delivery options with the acquisition of Postmates. Now, the company is adding groceries and more to its delivery of prepared foods, recently announcing partnerships with Costco Wholesale Corp.
Albertsons Cos. Inc.
and floral company FTD. In addition, Uber announced a planned $2.25 billion acquisition of freight leader Transplace to speed up its freight division’s path to breaking even.
“Ride-sharing, New Mobility products (i.e. shared bikes and scooters), app-based food delivery, and logistics are all set to benefit from multiyear secular offline-to-online conversion tailwinds, and we believe Uber is the best-positioned company to capitalize on these trends globally,” Cowen analysts wrote in a note earlier this month.
Investment research firms’ surveys show a continued upward trajectory for ride-hailing demand and spending on Uber services. According to a Cowen survey, Uber Eats’ monthly active users rose at least 2% from the previous quarter and 3% year over year. That same survey showed second-quarter order frequency climbed to all-time highs.
KeyBanc Capital Markets said its data indicates that driver-supply shortages seen by Uber and competitor Lyft Inc.
are improving, as both companies pulled back on driver incentives from June to July.
MKM Partners analysts also pointed to Uber’s equity stakes in companies such as Didi Global Inc.
Grab Holdings, Joby Aviation and more, and said they “see several layers of growth unlocking over the next six months, probably better than any other Internet company at scale.”
Chinese ride-hailing giant Didi, though, is under pressure from the Chinese government, which is cracking down on tech companies. And Uber shares fell sharply Wednesday after reports that SoftBank Group Corp.
is weighing selling a third of its stake in the company to offset its investment losses in Didi.
As for the Delta variant of COVID-19, analysts at Wedbush Securities said in a note that they expect to see “good news around underlying ride-sharing demand metrics and profitability outlook despite” it.
What to expect
Earnings: Analysts surveyed by FactSet on average expect Uber to post a loss of 54 cents a share, or a loss of $907.2 million, compared with the company’s $1.8 billion loss in the year-ago period. The average expectation of analysts, hedge-fund managers, executives and more as gathered by Estimize also is a loss of 54 cents a share.
Revenue: Analysts on average expect revenue of $3.74 billion, compared with $2.2 billion in the year-ago quarter, according to FactSet. Estimize is guiding for $3.86 billion.
Stock movement: Uber stock has declined following earnings in three of the past four quarters, and five of the nine reports it has made since going public. Uber shares are down 14% so far this year through Friday’s session, while the S&P 500 index
has gained more than 17%.
What analysts are saying
Investors are awaiting profitability for Uber, which has lost billions of dollars since its inception, and see signs of it in some of its businesses and metrics.
“The core ride-sharing platform is profitable on a per-trip basis under our analysis, and the company is poised to continue to gain and retain share in multiple fast-growing geographies and adjacent spaces,” wrote John Blackledge, Cowen analyst, in a note to investors earlier this month.
Rohit Kulkarni, managing director of MKM Partners, told investors in a note that Uber has “a clear pathway to delivery profitability.” Meanwhile, KeyBanc’s Edward Yruma wrote that “Uber is continuing to see positive spend vs. 2019 due to the strength in the Eats business, with 11% growth the week of 7/11.”
Cowen’s Blackledge said Uber’s Transplace purchase should “organize and expand Freight’s operations, while accelerating the segment’s path to profitability, which is now expected in the [fourth quarter of 2022].”
When it comes to the regulatory issues surrounding classification of ride-hailing drivers, analysts’ takes differ. “The ride-sharing industry is seeing intensifying regulatory scrutiny globally,” wrote Yruma.
On the other hand, Mizuho Securities analysts said in June that in the U.S., “state policies are moving in the right direction” for Uber.
“Gig labor bills in critical states such as [New York] and [Massachusetts] are using Proposition 22 as a framework for negotiations, so the risk of reclassifying to full employment is limited,” wrote James Lee, managing director for Mizuho. Proposition 22 is the ballot initiative passed by California voters last year that carves out a new classification for app-based gig workers, allowing Uber, Lyft and others to continue to treat them as independent contractors instead of employees.
Out of 37 analysts surveyed by FactSet, 30 have a buy rating on Uber stock, while three have a hold rating, two say sell and two rate the stock at overweight. The average price target as of Friday was $69.53.