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Uber (UBER) Down Despite Narrower-Than-Expected Q3 Loss

Zacks Equity Research

Uber Technologies, Inc. UBER released its third earnings report since going public in May. The company incurred a loss of 68 cents per share (or net loss of $1.16 billion, up 18% year over year) in the third quarter of 2019, narrower than the Zacks Consensus Estimate of a loss of 83 cents. Moreover, the amount of loss decreased year over year. Total revenues of $3,813 million beat the Zacks Consensus Estimate of $3,746.4 million and also rose 29.5% year over year.

Despite this outperformance, shares of the company were down more than 5% in after-hours trading on Nov 4, primarily due to lower-than-expected gross bookings. While, the company’s total gross bookings of $16.46 billion increased 29%, it fell short of the Zacks Consensus Estimate of $16.81 billion. Gross bookings from Rides improved 20% to $12.55 billion but missed the consensus mark of $12.62 billion. Also, Uber Eats gross bookings of $3.66 billion (up 73%) fell shy of the Zacks Consensus Estimate of $3.94 billion.

Following an organizational change in the third quarter, Uber started reporting through five segments, namely Rides, Eats, Freight, Other Bets, and Advanced Technologies Group (ATG) and Other Technology Programs.

In the third quarter, majority (75.9%) of the company’s revenues came in from Rides, which increased 19% to $2,895 million. Uber Eats revenues jumped 64% to $645 million while Freight revenues soared 78% to $218 million with gross bookings ascending 81%.

Total revenues grew 39% to $2,407 million in the United States and Canada. The same rose 24% to $534 million in Europe, the Middle East and Africa. While total revenues surged 31% to $345 million in the Asia Pacific region, it inched up 2% to $527 million in Latin America. Monthly active platform customers also grew 26% to 103 million.

Additionally, cost of revenues (excluding depreciation and amortization) at Uber, which competes primarily with Lyft (LYFT) in the ride hailing market, rose primarily due to higher driver incentives. Total expenses on sales and marketing surged 41.8% to $1.11 billion in the reported quarter.

Uber, carrying a Zacks Rank #3 (Hold), exited the third quarter with cash and cash equivalents of $12.65 billion compared with $6.41 billion at the end of 2018. Long-term debt, net of current portion, at the end of the quarter was $5.71 billion compared with $6.87 billion at 2018 end. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

With adjusted net revenue growth of 33% in the third quarter, Uber anticipates this uptrend to continue in the fourth quarter. Additionally, with consistent focus on financial discipline, the company now expects an improvement of $250 million in its 2019 adjusted EBITDA to a loss of $2.8-2.9 billion. The company hopes to achieve EBITDA profit for the full year in 2021. While releasing third-quarter earnings numbers, its rival Lyft LYFT stated that it expects to earn profits in terms of Adjusted EBITDA in the fourth quarter of 2021.

Key Picks

Some better-ranked stocks in the Computer and Technology sector are HealthStream, Inc. HSTM and Akamai Technologies, Inc. AKAM. While HealthStream sports a Zacks Rank #1 (Strong Buy), Akamai carries a Zacks Rank #2 (Buy). Shares of HealthStream and Akamai have rallied more than 13% and 43% so far this year, respectively.

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