Uber Stock: Show Us the (Lost) Money

Stocks to sell

Uber (NASDAQ:UBER) will deliver its first earnings report as a public company after the market closes May 30, and investors are bracing for bad news.

Uber Stock: Show Us the (Lost) Money

Source: Shutterstock

The company is expecting to lose $2.39 per share, on revenue of $3.07 billion. This comes to $4 billion based on Uber’s 1.68 billion shares outstanding. In one quarter. Keep that up for a year and you’re “only” paying 5.5 times revenue at the company’s May 30 market cap of $67 billion. The “better” news is you’re only paying 4 times losses.

That’s right, Uber’s latest innovation is a new ratio — the price-to-losses ratio. It’s like the price to earnings ratio, only upside down.

And on that news, Uber opened for trade up half a percent on May 30, at $40 per share.

Not a Fan of Uber Stock

I admit to not being a fan of Uber stock. I even asked if you could short it when it went public early this month.  If you took that for investment advice, you’re still in the money.

I can now claim I’m not a fan of Uber’s service, either. I tried one of their electric bikes over the weekend. It’s heavy. It can’t go uphill. I did a ride on my old road bike afterward and used less energy.

Uber also dinged me because I had to leave the bike near someone’s home, a half-mile away. That’s because the bikes are banned from my street and its nearby transit stop. My review was not kind, so I guess they won’t want to do business with me.

Bikes, like scooters, are immaterial to Uber results. The hope is the company can use them to build partnerships with transit agencies, transportation companies, and others. Scooters (and bikes) can be a fill-in solution for short trips in crowded urban environments, where cars are  stuck in traffic, but distances are too far for comfortable walking.

The Real Problem

Scooters and bikes are the moves of a mature company, not a fast-growing start-up focused on cars.

Uber CEO Dara Khosrowshahi sent employees a memo after the failed IPO, comparing the open to those of Amazon.Com (NASDAQ:AMZN) and Facebook (NASDAQ:FB), which also did not impress out of the gate.

The year before Amazon went public, in 1997, its total revenue was under $16 million. The year before Facebook went public, in 2011, its revenue was $3.7 billion, and it had just committed to becoming a cloud company.

Uber, by contrast, had 2018 revenue of $11.3 billion  and its big innovation is an electric scooter?

The situations are just not comparable.

Another thing that isn’t mature at Uber is its business model. California wants to make its drivers employees, which Uber believes would be disastrous. So far, it has mainly been a way for drivers to finance car purchases, an indentured version of Ford (NYSE:F) Motor Credit.

The long-term bet on Uber has always been one on self-driving cars. But a new MIT study shows self-driving cars will cost services like Uber four times more to operate than previously thought , and three times more than the cost of just buying a car.

The Bottom Line

There’s a bright spot in Uber’s numbers — namely Uber Eats. The delivery service is now available at more than half the McDonald’s (NYSE:MCD) in the U.S., and is taking a “big bite” of sales.

In response, McDonald’s is ending Uber Eats’ exclusivity. If you like Uber Eats, buy McDonald’s.

Since Khosrowshahi compared his company to Amazon, a 1990s IPO, let me close by saying Uber does remind me of a big IPO from that era.

Uber reminds me of Webvan.

Dana Blankenhorn is a financial and technology journalist. He is the author of a new environmental story, Bridget O’Flynn and the Bear, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.

Products You May Like

Leave a Reply

Your email address will not be published. Required fields are marked *