Uber Posts $5bln Loss In Q2, Misses EPS Estimates

Uber Posts $5bln Loss In Q2, Misses EPS Estimates
August 12, 2019


Ride-hailing service Uber Technologies, Inc. (NYSE: UBER) posted a massive loss of $5 billion in its fiscal 2019 second-quarter, with both revenue and earnings missing Wall Street forecasts. Notably, the company recorded a new milestone of 100 million “Monthly Active Platform Consumers” at the end of July, more than triple the 30 million customers reported at the end of 2018. The stock ended Friday’s trading session at $40.05, down 6.80% or $2.92 from the prior close.

San Francisco, California-based company, posted fiscal 2Q19 second-quarter revenues of $3.17 billion, up 14% from $2.77 billion in the corresponding quarter last year.

For the second quarter, Uber’s net loss widened to $5.24 billion or $4.72 per share, from $878 million or $2.01 per share in the prior-year period. Losses widened mainly due to stock-based compensation. Excluding stock-based compensation, Uber’s losses would have been $1.30 billion, about 30% higher than the previous quarter. The Wall Street analysts anticipated Uber to post a net loss of $3.19 per share on revenues of $3.36 billion. As a public company, in May 2019, Uber reported a first-quarter loss of $1 billion on revenues of $3.10 billion.

The company’s CEO Dara Khosrowshahi highlighted the growing popularity of its app: “Our platform strategy continues to deliver strong results, with Trips up 35% and Gross Bookings up 37% in constant currency, compared to the second quarter of last year.  In July, the Uber platform reached over 100 million Monthly Active Platform Consumers for the first time, as we become a more and more integral part of everyday life in cities around the world.”

During the second quarter, gross bookings increased 31% to $15.76 billion, as trips grew 35% to $1.68 billion. Monthly active platform consumers grew to 99 million in 2Q19, from 76 million in the year-ago period.

Uber’s core ride-hailing business posted revenue of $12.19 billion in gross bookings in 2Q19, exceeding analysts’ estimate of $12.11 billion. Likewise, Uber Eats business posted $3.39 billion gross bookings, missing analysts’ estimate of $3.51 billion.

The CEO also stated that the company’s Eats business has huge growth prospects and continues to be backed by investors across the globe. Khosrowshahi said, “The Eats business is still a business that carries very significant growth going forward and that continues to attract a lot of capital. Not just in the US, but all over the world. With the eats business, there’s a lot of capital chasing a lot of growth and we’re the leader on a global basis. So, I don’t expect that business to be profitable in the next year or year after frankly.”

Even though Uber assisted in establishing ride-hailing in several countries across the globe, during the past ten years, the company has been investing in a range of “on-demand” services such as food delivery, freight service matching shippers with cargo carriers, and bike-sharing.

The CEO is confident of bringing down losses in 2020 and 2021. Khosrowshahi is optimistic that the business will soon break even and turn profitable. Dara Khosrowshahi said, “We think that 2019 will be our peak investment year and we think that 2020, 2021, you’ll see losses come down. I think our breakeven is something that we can push the company to break even if we really wanted to frankly. No doubt in my mind that the business will eventually break even and become a profitable business.”

In the past few weeks, Uber has axed roughly 400 jobs from its marketing team. Uber continues to follow its strategy of keeping drivers and riders loyal to its app with membership loyalty rewards and membership offerings, while fighting tough competitors such as Lyft in North America, and Didi and Grab in Asia. Despite these developments, Uber has the responsibility to convince investors with a feasible plan that the company will return to profit and generate returns for investors.

Therefore, we are expecting the stock to remain weak in the short-term. Technically, the stock has broken below its 50-day moving average. Furthermore, the MACD indicator has a negative reading. As a result, we can expect the stock to move down in the short-term.

ubr - technical analysis - 12 Aug 2019

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Sammy is our forex expert, with over 20 years experience in the financial sector, she will be keeping you up to date with the ups and downs of currencies around the world

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