Uber Technologies, Inc. (UBER) is trading lower by nearly 4% in Thursday's pre-market session after meeting fourth quarter 2020 earnings estimates with a loss of $0.54 per share while revenue fell short of expectations, dropping 15.5% year over year to $3.17 billion. Gross bookings rose 16% year over year to $17.2 billion, 5% less than the same quarter last year, while delivery gross bookings picked up the slack with a 128% increase.
- Uber lost money in the fourth quarter, as expected, while revenue shrunk below consensus.
- The company expects to be profitable by the end of 2021.
- Delivery services have recouped a sizable share of lost rider income.
Monthly average platform consumers (MAPC) fell 16% year over year to 93 million as a result of ongoing pandemic pressure, but Uber said that it's still on track to turn EBITDA positive by the end of 2021. However, it said the same thing in 2020 but had to withdraw guidance when the pandemic triggered a ridership collapse. The company now believes its highly successful delivery service, coupled with cost controls, will be enough to overcome lost bookings revenue.
Heading into the report, it appeared Uber would benefit from improving sentiment after rival Lyft, Inc. (LYFT) posted a smaller-than expected fourth quarter loss on Tuesday and made upbeat comments about a second half recovery. The recovery mantra makes more sense now than it did in 2020, with vaccines now working their way around the planet starting to have an impact on infection rates following this winter's enormous outbreak.
Wall Street consensus on Uber is modestly bullish, with an "Overweight" rating based upon 31 "Buy," 3 "Overweight," and 5 "Hold" recommendations. Three analysts now recommend that shareholders close positions and move to the sidelines. Price targets currently range from a low of $50 to a Street-high $80, while the stock is set to open Thursday's session about $7 below the median $68 target. This humble placement could limit downside in coming sessions.
EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a measure of a company's overall financial performance and is used as an alternative to net income in some circumstances. EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.
Uber Daily Chart (2019 – 2021)
The company came public at $42.00 in May 2019 and topped out at $47.08 just one month later. Bears took control into November, dropping the stock into the mid-$20s. The subsequent recovery wave stalled at the IPO opening print in February 2020, giving way to a vertical decline that dropped the stock more than 65% to an all-time low at $13.71 in March. A bounce into June came up short, stalling about three points below the first quarter peak.
Quiet narrow-range action into early November carved a stable platform, ahead of a strong buying impulse after California voters overturned legislation that designated Uber drivers as employees instead of independent contractors. The rally quickly mounted June 2019 and February 2020 resistance, signaling a breakout that stalled at $60.03 in January. Price action mounted that level just ahead of the release, while the overnight selloff is testing new support.
The stock needs to hold the $60 level to avoid a small-scale failed breakout that exposes additional downside into the upper $40s. The on-balance volume (OBV) accumulation-distribution indicator hit a new high with price this week, indicating strong retail and institutional sponsorship. OBV could generate an early warning signal if selling volume in the next few days exceeds the current 22.3 million average daily volume.
An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. Public share issuance allows a company to raise capital from public investors.
The Bottom Line
Uber has sold off after missing fourth quarter revenue estimates but still expects to be profitable by the end of 2021.
Disclosure: The author held no positions in the aforementioned securities at the time of publication.