🚕 Has Uber Finally Begun To Deliver?

Lucid cuts production outlook by half.

Hey Global Investor! Here’s what you need to know before the US markets open.

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🚕 Uber: Moving To Top Gear?

Ride-hailing aggregator Uber Inc. (UBER) reported positive free cash flow for the first time in Q2. It has guided for a higher-than-estimate operating profit for the current quarter, adding to the positive newsflow for the company. Will shares finally make it back above their IPO price?

Uber’s WeWork Moment

What is common between WeWork’s Adam Neumann, Theranos’ Elizabeth Holmes, and Uber’s former CEO & co-founder Travis Kalanick? Their rise and subsequent fall became the subject of television drama.

Uber has been in the news more for the wrong reasons than right since its inception. Allegations of sexual harassment, workplace culture investigations, and unflattering videos and emails from Kalanick, have only fetched bad press for the company.

There have also been tussles with regulators, unions, and a legal battle with Alphabet, not to forget mounting losses and infighting among investors. Uber finally replaced Kalanick in 2017 after a shareholder revolt, bringing Dara Khosrowshahi as the new man at the helm. The company went public in 2019 at an $80B valuation while warning investors that it may “never earn a profit.”

Under Khosrowshahi, Uber has invested heavily in its grocery, beverage, and convenience delivery segment through acquisitions like alcohol-delivery service Drizly and Postmates last year. It failed to acquire food delivery service Grubhub where Amazon recently purchased a stake. The food delivery business kept Uber afloat during the pandemic as the ride-sharing division shuttered until the economies opened up.

Gig economy companies like Uber have refused to classify drivers as employees, depriving them of minimum pay and other benefits. It even won one of the costliest ballot measures in this regard in California in 2020. However, a judge termed the ballot measure “unconstitutional” last year. It lost a similar reclassification battle in the UK as well. The companies are now appealing the order.

Uber’s tryst with regulators is well known. It has finally managed to get into the good books of those in London, its second-largest market with over 70K drivers. Last month, it also settled a case with the Justice Department that alleged it wrongfully charged wait-time fees to passengers with physical disabilities.

Cash In Sight

Uber delivered positive free cash flow for the first time in its history in Q2. It also beat analyst estimates on the revenue front. However, it continues to remain loss-making on a net basis.

Key Highlights From Q2:

  • Revenue: $8.07B Vs $7.39B expected
  • Loss Per Share: $1.33, not comparable to estimates
  • Free Cash Flow: $382M Vs $263.2M expected
  • Adjusted EBITDA: $364M Vs $255M (internal estimate)
  • Gross Bookings: $29.1B, up 33% Year-on-Year

The company continues to benefit from an increase in on-demand transportation and a shift in spending from retail to services. For the current quarter, Uber expects gross bookings between $29B-$30B and adjusted EBITDA to range between $440M-$470M. The company has been profitable on an operational basis since Q3 last year.

Net loss for the quarter came in at $2.6B, of which $1.7B came from its investments and a revaluation of stakes in Aurora, Grab, and Zomato. Uber exited India’s food delivery start-up Zomato on Wednesday, selling its 7.8% stake for $392M, making a 2.4x return on its investment.

Uber’s mobility segment revenue surpassed Eats’ in Q1 this year, as riders began taking more trips. The trend has continued in Q2, with the mobility business reporting $3.55B in revenue, compared to delivery’s $2.69B. Growth in the delivery business slowed from the prior quarter, but the company is confident that ordering in will become a habit for consumers.

The company added more drivers and delivery agents to its fleet in Q2, taking the total number to an all-time high of 5M. Khosrowshahi mentioned on the analyst call that new driver sign-ups increased 76% year-on-year. 70% of those drivers said that inflation and cost of living played a part in their decision to join Uber.

Uber rolled out new features to support drivers last week, enabling them to see how much they will earn and where they are going before accepting a trip. The changes will help lower wait times for drivers. It also announced the Uber Pro debit card and checking account, which offers drivers up to 7% cash back on gas at select stations. Drivers’ earnings will be deposited directly into their accounts.

The latest innovations come after Uber added a surcharge on fares and deliveries in March to help drivers offset rising gas prices. The management expects driver growth to continue without any further incremental incentive investments.

Uber’s cash register has finally started ringing, rekindling some hope in the hearts of the investors. Shares are still a third below their IPO price of $45. Investors would appreciate some Uber Cool returns while hoping the ride is less bumpy than it has been so far!

Market Reaction
UBER ended at $30.19, up 3.21%.

Company Snapshot 📈

UBER 30.19 +0.94 (3.21%)

Analyst Ratings (45 Analysts) BUY 89%  HOLD 11%  SELL 0%

Newsworthy 📰

Halved: EV maker Lucid again cuts production targets as logistics challenges cripple output (LCID -11.96%) (Premarket)

Investor Meet: Tesla shareholders expected to clear path to 3-for-1 stock split (TSLA +1.53%) (Premarket)

Above Estimates: Alibaba shares jump after quarterly earnings beat expectations (BABA +4.39%) (Premarket)

Later Today 🕒

  • Alibaba Group Holding Ltd. Earnings (BABA)
  • Block Inc. Earnings (SQ)
  • Cigna Corp. Earnings (CI)
  • Monster Beverage Corp. Earnings (MNST)
  • ConocoPhillips Earnings (COP)
  • DoorDash Inc. Earnings (DASH)
  • Eli Lilly & Co. Earnings (LLY)
  • Kellogg Co. Earnings (K)
  • Lyft Inc. Earnings (LYFT)
  • Warner Bros. Discovery Inc. Earnings (WBD)
  • WeWork Inc. Earnings (WE)
  • Amgen Inc. Earnings (AMGN)
  • Beyond Meat Inc. Earnings (BYND)
  • Astra Space Inc. Earnings (ASTR)
  • Chegg Inc. Earnings (CHGG)
  • Crocs Inc. Earnings (CROX)
  • Expedia Group Inc. Earnings (EXPE)
  • FuboTV Inc. Earnings (FUBO)
  • GoPro Inc. Earnings (GPRO)
  • Hawkins Inc. Earnings (HWKN)
  • HubSpot Inc. Earnings (HUBS)
  • Nikola Corp. Earnings (NKLA)
  • XPO Logistics Inc. Earnings (XPO)
  • Zillow Group Inc. Earnings (ZG)
  • 6:00 PM IST: Initial Jobless Claims
  • 6:00 PM IST: Trade Deficit

Today’s Fun Fact

Today the official color for New York City taxi cabs is not just any sort of yellow, but Dupont M6284 yellow or its equivalent

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