The battle for the passenger has always existed. However, since the U.S. ride-sharing platform Uber began operations in 2009, the market for passenger transportation has changed fundamentally. Furthermore, the company, which once started as a limousine ride service, has expanded more broadly. Along with the online brokerage services for passenger transportation, a meal delivery service was added with Uber Eats. In addition, the company also acts as an intermediary between freight forwarders and transport companies in the freight industry or takes on deliveries of medicines. In general, Uber sees itself as a technology company that helps people to connect and get around in more than 70 countries and 10,000 cities worldwide.
What sounds like a success story doesn't feel that way to everyone. That's primarily true for shareholders. In May 2019, the start-up went public at USD 45, but was initially unable to defend this level. Subsequently, the stock fluctuated jauntily up and down, marking a high at USD 64 and a low again at USD 13.71. A short-term upward trend since the middle of the year now ensures that the stock is back in the range of the issue price, which should be at least a small consolation for first-time subscribers.
The upward movement is accompanied by an improved operating performance. Already at the beginning of the year, the San Francisco-based service provider presented a positive interim report. The cab rival increased its revenues by a whopping 29% to USD 8.8 billion year-on-year, which was stronger than expected. Although the bottom line still showed a loss of USD 157 million, this was significantly less than the almost USD 6 billion in the same period of the previous year.
In the second quarter, Uber now went one better. In the wake of a comprehensive cost-cutting program combined with growing demand for its services, the Californian company turned a profit for the first time. The surplus amounted to USD 394 million between April and June, compared with a shortfall of USD 2.60 billion a year earlier. "Robust demand, new growth initiatives and continued cost discipline led to an excellent quarter with a 22% increase in rides and the first profit in the company's history," said group chief executive Dara Khosrowshahi, explaining the strong performance. According to the 54-year-old executive, rides in the U.S. and Canada returned to pre-pandemic levels, rising to an average of 25 million rides per day across all Uber markets in the quarter.
Khosrowshahi, who has been CEO since 2017, is also optimistic about the current third quarter. He expects adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) of between USD 975 million and USD 1,030 million. According to Refinitiv data, analysts had only USD 925.9 million on tap for the widely watched earnings figure.
However, the interim results are not free of blemishes. Although sales increased by 14% to USD 9.2 billion, they were slightly below the estimates of USD 9.33 billion. In the previous quarter, as described above, it was still 29%, and in the third and fourth business quarters of 2022, values of 72% and 49% respectively were achieved. However, it is not only the declining pace of sales that is currently preoccupying market participants, but also the recent announcement by Lyft, the second largest player in the U.S. market, to cut prices in order to gain market share. Indeed, the competitor's aggressive pricing could gnaw away at Uber's profits.
From a valuation perspective, Lyft currently appears cheaper than Uber with a 2024 P/E of 43 compared to 21, but Lyft is expected to grow at a much slower pace. Still, analysts disagree on how much potential remains in Uber's stock. The highest estimate of 39 research reports is USD 75, the lowest USD 32.50. On average, all studies calculate a price target of USD 58.
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