Ride-Hailing Platform Uber reported (NYSE:UBER) announced revenue that beat expectations and an accelerating growth rate which the market obviously loves. 

The stock is up a bit more than 2% in after-hours trading.

The take rate of the ride-hailing and Uber Eats businesses were up nicely from the same time last year, rising to 22% and 9% from 20% and 6% in Q4 2018.

Revenue came in at $4.07 billion, 7% better than consensus of $4.06 billion.


Revenue growth of 37% was up from last quarter’s growth of 35% and is a good sign for a company that needs all the help it can get. 

Adjusted earnings per share missed estimates, coming in at a loss of -$0.64 compared to the consensus estimate of a -$0.52 loss.

EBITDA, which is similar to cashflow, was a loss of $615 million, 12% better than what analysts were looking for but is still an increased loss from last quarter.

Losses are shrinking at a pace that implies 2 years 3 months until the company will break even while the cash balance will only last another 2 years 6 months at the current burn rate.

They are cutting it close.

Users of the platform hit 111 million, up 22% from last year. Last quarter users growth was 26%.

Earnings this quarter did nothing to pull Uber out of its holding pattern in our opinion. Accelerating growth is a good first step, but we need to see cashflow losses shrink for at least 2-3 quarters in a row before we would get much more constructive on the stock.

Uber is still on very uncertain footing with deepening losses even though revenue growth has been solid. Revenue growth has been driven by a ceasefire in pricing wars, but could easily reverse. The stock won’t start to move towards our $60 target price until management can demonstrate to the market there is a clear path to profitability. 

 

There is nothing to get excited about with Uber and Lyft at this point.

Yes they are growing relatively quickly for the car manufacturing business, but growth is nothing special for companies who bill themselves as tech stocks.

If they can turn the EBITDA losses into EBITDA gains, then valuations start to look more interesting.

Even Tesla at an eye-watering $730/sh doesn’t look so overvalued next to Uber, Lyft and their steep losses.

Ride-Hailing Compared to Car Manufacturing

2020 Estimates Price/Sales Revenue Growth EBITDA Margin 
Lyft 3.1x 29% -15%
Uber 3.5x 39% -15%
Tesla 4.3x 21% 16%
Honda .34x 2% 8%
Ford .25x -1% 7%

Uber vs Lyft Compared

Uber is making a bet that Eats and other businesses Lyft does not have will contribute to better growth AND margins.

Uber and Lyft currently look very similar.

Longer term the only big difference will be in the growth rates and profit margins.

Uber is making a bet that Eats and other businesses Lyft does not have will contribute to better growth AND margins.

Though both companies are guiding to a profit in 2021, we think Uber’s guidance is more at risk.

Uber is clearly betting that Uber Eats can become a much larger and profitable segment of the company, but with competitors flush with cash and ready for a fight, we’re skeptical Uber can hit their profit targets.

Lyft on the other hand only has ride-hailing where we are seeing discounting slow, at least for now.

Key Metrics (Uber vs Lyft)

Uber Lyft
Rider Growth YoY 26% 28%
Quarterly Revenue YoY 42% 63%
Operating Margin YTD -37% -34%
2020 Price/Sales Estimate 2.7x 2.8x

Below is our view of where the buy and sell signals are for Uber stock.

The stock isn’t worth more than $60 in our current outlook and based on the output of our tool, the current stock price of $37.15 is fair to slightly expensive.

If the stock goes through $40 without showing an improvement in profitability it may be time to think about taking profits.

Grizzle’s Guide to Trading Uber

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.