Uber Sells Off to 18-Month Low Despite Bullish Guidance

Uber Technologies Inc. (UBER) fell 4% to an 18-month low on Monday, despite raising Q1 2022 adjusted EBITDA expectations from the $100 – $130 million range to the $130 – $150 million range. The company touted projected ‘earnings before interest, taxes, depreciation, and amortization’ even though it posted the first operating profit in its three-year public history in the quarter ending on Dec. 31. That’s a big deal because industry costs are now soaring as a result of rising inflation and sky-high gas prices.

Soaring Gas Prices Set to Impact Bookings

The company noted that mobility demand had “improved significantly through the month of February, with trips 90% recovered and gross bookings 95% recovered vs. February 2019. Additionally, delivery annualized run rate gross bookings reached an all-time high”. However, the Ukraine war hit headlines like a sledgehammer in the second half of the month, impacting positive consumer sentiment that had nearly shaken off the Omicron wave.

Uber CEO Dara Khosrowshahi probably didn’t expect the stock to sell off when he noted that “Our Mobility business is bouncing back from Omicron much faster than we expected. Whether for travel, commuting, or going out at night, we’re seeing healthy and growing demand across all use cases, highlighting just how eager consumers are to get moving again. In fact, airport gross bookings exiting February were up over 50% month-on-month, and we’re preparing for the upcoming travel season to be one of the strongest ever”.

Wall Street and Technical Outlook

Wall Street consensus stands at a ‘Buy’ rating based upon 34 ‘Buy’, 3 ‘Overweight’, 4 ‘Hold’, 0 ‘Underweight’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $28 to a Street-high $80 while the stock is set to open Tuesday’s session just $1 above the low target. This dismal placement highlights the abandonment of growth stocks all across the market universe, with less profitable companies taking the biggest hits.

Uber came public in the low 30s in May 2019 and entered a trading range between 47.08 and 13.71. It bounced to range resistance in November 2020 and broke out, posting an all-time high at 64.05 in February 2021. Aggressive sellers then took control, failing the breakout in May, ahead of additional losses that sliced through the IPO opening print in August. The stock is now testing summer 2020 support in the upper 20s, with a breakdown exposing the deep pandemic low in the teens.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Inflation: The Fed’s Guiding Light and the Biggest Worry for Investors

While indexes did manage to make small gains yesterday, they remain in negative territory for the year. The “buy-the-dip” trading mentality that helped indexes swiftly rebound from downturns the past couple of years has mostly been smothered by uncertainty about Federal Reserve monetary policy in the months ahead.

In other words lots of people are freaked out and a bit nervous about how stocks might perform in a rate hiking environment.

Just keep in mind, from June 2004 to June 2006 Fed Funds went from 1.00% to 5.25%. There were a total of 17 rate increases across this period, each 25 basis points and stocks did not get hammered.

Inflation

Today, inflation seems to be the Fed’s guiding light and investors are extremely concerned that data between now and the central bank’s next meeting on March 15-16 will fail to show any signs that price pressures are easing. That’s largely due to fallout from the Omicron Covid wave that further exacerbated supply chain dislocations and labor shortages.

Those two issues have been key drivers of escalating inflation which has pushed higher nearly every month since June of 2020. The only exceptions are October, when CPI came in flat, and November when it dipped a puny -0.1%.

Data to watch

Upcoming data to watch includes the January Consumer Price Index (CPI) tomorrow, the PCE Prices Index for January on 2/25, the February Employment Situation on 3/4, and March CPI on 3/10.

Today, investors will be scrutinizing the Energy Information Administration’s Petroleum Status Report. The report last week showed an unexpected decline in U.S. crude inventories, as well as raw oil at the Cushing, Oklahoma delivery point for WTI. Cushing inventories stood just above 30 million barrels as of January 28—down from 60 million barrels at the start of 2021, and down from 37 million barrels at the end of 2021. U.S. distillate levels are particularly concerning, with inventories as of January 28 falling to the lowest seasonal level in eight years.

The low inventories, which were -26 million barrels (-17%) below the pre-pandemic five-year average, are likely the result of booming manufacturing and freight demand. The American Petroleum Institute yesterday estimated that distillate inventories declined last week by -2.2 million barrels while U.S. crude supplies likely dipped by over -2 million barrels.

Most oil insiders believe the world oil market is under-supplied with OPEC+ struggling to meet production targets and economic activity rapidly rebounding from the Omicron wave that swept the entire globe.

Analysts think that signs of easing tensions between Russia and the West could stall the current rally in oil prices but it will likely only be temporary as supply concerns escalate.

On earnings front, today’s highlights include Bunge, Cerner, CVS, Disney, GlaxoSmithKline, Honda, Mattel, MGM Resorts, Motorola, O’Reilly Automotive, Toyota, Twilio, and Uber.

Wall Street Week Ahead Earnings: KKR, Walt Disney, Coca-Cola, Twitter and PepsiCo in Focus

Investors will focus on December quarter earnings for stocks that are economically sensitive, which should show better profits than technology stocks. Increasing Treasury yields and risk aversion could hit the stock market hard over the coming months. In addition, investors will closely monitor the latest news on the rapidly spread Omicron coronavirus variant to see how it impacts earnings in 2022.

Earnings Calendar For The Week Of February 7

Monday (February 7)

TICKER COMPANY EPS FORECAST
ACM AECOM $0.77
CHGG Chegg $0.13
HAS Hasbro $0.85
LEG Leggett & Platt $0.73
ON ON Semiconductor $0.94
THC Tenet Healthcare $1.49
TSN Tyson Foods $2.01

 

Tuesday (February 8)

IN THE SPOTLIGHT: KKR

The U.S.-based investment firm KKR & Co is expected to report its fourth-quarter earnings of $1.02 per share, which represents year-over-year growth of over 108% from $0.49 per share seen in the same period a year ago.

The company that manages multiple alternative asset classes would post revenue growth of 17% to $784.8 million. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

“Strong near-term growth with fundraising supercycle and GA accretion coming into earnings, but we see this reflected in the price at the current valuation for a business model with greater earnings contribution from the balance sheet (40%). While strong investment performance could drive upward estimate revisions, we have less visibility on more episodic investment income gains,” noted Michael Cyprys, equity analyst at Morgan Stanley.

“Mgmt’s increased focus on expanding the platform with adjacent strategies and scaling successor funds should drive higher fee-related earnings (FRE).”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 8

TICKER COMPANY EPS FORECAST
BP BP $1.18
IT Gartner $2.47
HOG Harley-Davidson $-0.37
LYFT Lyft $-0.46
PFE Pfizer $0.85

 

Wednesday (February 9)

IN THE SPOTLIGHT: WALT DISNEY

Walt Disney, a family entertainment company, is expected to report its fiscal first-quarter earnings of $0.68 per share, which represents year-over-year growth of over 112% from $0.32 per share seen in the same period a year ago.

The family entertainment company would post revenue growth of over 30% to $21.15 billion. The company has beaten earnings estimates in most of the quarters in the last two years, at least.

Disney is building content assets that enable it to take advantage of the significant direct-to-consumer streaming opportunity ahead. Disney’s underlying IP remains best-in-class, supporting long term content monetization opportunities,” noted Benjamin Swinburne, equity analyst at Morgan Stanley.

“During this period of FCF pressure from Parks closures, ESPN’s FCF generation is key to driving down leverage. Historical cycles suggest a potential return to above prior peak US Parks revenues in FY23.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 9

TICKER COMPANY EPS FORECAST
AFG American Financial Group $2.98
CVS CVS Health $1.56
HMC Honda Motor $0.95
RDWR Radware $0.13
SGEN Seagen $-0.74
TM Toyota Motor $3.76
UBER Uber Technologies $-0.33

 

Thursday (February 10)

IN THE SPOTLIGHT: COCA-COLA, TWITTER, PEPSICO

COCA-COLA: The world’s largest soft drink manufacturer is expected to report its fourth-quarter earnings of $0.41 per share, which represents a year-over-year decline of over 12% from $0.47 per share seen in the same quarter a year ago. However, the company’s revenue would grow nearly 4% to $8.94 billion.

TWITTER: The social media giant is expected to report its fourth-quarter earnings of $0.35 per share, which represents year-over-year growth of about 8% from $0.38 per share seen in the same period a year ago.

The company would post revenue growth of over 21% to $1.57 billion. Twitter expects revenues of approximately $1.5 billion to $1.6 billion in the fourth quarter of 2021. GAAP operating income is expected to range from $130 million to $180 million, according to ZACKS Research.

With a focus on engineering and products, Twitter expects to increase headcount and costs by 30% or more in 2021. In 2021, the company expects total revenues to grow faster than expenses.

“Lack of Negative Revisions and Relative Valuation: Valuation continues to be expensive, but we think investors are likely to continue to pay a premium for Twitter (TWTR) given 1) continued turnaround progress and 2) platform scarcity,” noted Brian Nowak, equity analyst at Morgan Stanley.

“Execution Risk Remains Around Driving Advertiser ROI: Advertiser ROI has clearly improved on Twitter, but the company needs to improve ad targeting and measurability to compete with the larger players. To do that it will have to further personalize the content that users see and use its data more effectively, both of which remain key strategic challenges (and priorities) for management.”

PEPSICO: The Harrison, New York-based global food and beverage leader is expected to report its fourth-quarter earnings of $1.52 per share, which represents year-over-year growth of over 3% from $1.47 per share seen in the same period a year ago.

The U.S. multinational food, snack, and beverage corporation would post revenue growth of about 9% to $24.35 billion. It is worth noting that the company has consistently beaten consensus earnings estimates in the last two years, at least.

The company revised its organic revenue growth to 8% from 6% previously. The company estimates core earnings of $6.20 per share for 2021, compared to $5.52 in 2020, according to ZACKS Research.

PepsiCo struggles with supply-chain headwinds that have caused it to increase costs and limit its output. Investors will want to know whether the beverage company is winning this battle when it reports its financial results for the fourth quarter of 2021 on Thursday, February 10.

“For the quarter, we are expecting PepsiCo (PEP) to deliver EPS of $1.47, which implies flat YoY growth and is 4 pennies below consensus EPS of $1.51. Our $1.47 4Q21 estimate implies FY21 EPS of $6.20, which is at the low end of management’s expectation to deliver “at least” $6.20 in EPS and may ultimately prove conservative given PepsiCo’s (PEP) history of outperforming expectations. Since 1Q18, we can see that PEP’s reported EPS has come in above consensus in 14 out of the past 15 quarters, with an average upside surprise of+5%,” noted Vivien Azer, equity analyst at Cowen.

“As we are already almost a month into the new year, all eyes will be on PepsiCo’s (PEP) initial FY22 guidance. As a reminder, on the last earnings call management noted that at the time they expected FY22 performance to be in line with its stated long-term targets, which means MSD (+4-6%) organic revenue growth and HSD core constant currency EPS growth.”

TAKE A LOOK AT OUR EARNINGS CALENDAR FOR THE FULL RELEASES FOR THE FEBRUARY 10

TICKER COMPANY EPS FORECAST
AZN AstraZeneca $0.78
EXPE Expedia Group $-0.01
GDDY GoDaddy $0.41
K Kellogg $0.8
MCO Moody’s $2.3
PEP PepsiCo $1.52
TWTR Twitter $0.16
WU Western Union $0.53

 

Friday (February 11)

TICKER COMPANY EPS FORECAST
APO Apollo Global Management $1.08
D Dominion Energy $0.93
FTS Fortis $0.58
MGA Magna International $0.81

 

Uber’s Excellent Week Translates Into Stock Price Rally

Uber has underperformed since the start of the year, with the numerous challenges in Europe affecting its stock price.

Uber CEO Says Company Recorded its Best-Ever Week

Uber CEO Dara Khosrowshahi revealed earlier today that the company just had its best week ever in terms of overall gross bookings. The ridesharing company has underperformed since the start of the year but is now performing excellently.

Khosrowshahi said, “Our overall mobility business continues to get closer to pre-pandemic levels. We’re starting to inch up to call it like the 90% mark, we’re not quite there. Last week was our best week, you know, post-pandemic.”

Gross bookings are Uber’s combined bookings for its ridesharing and delivery businesses. The CEO said the ridesharing business is recovering slowly as economies resume normal operations since the pandemic began.

The CEO also revealed that Uber is looking to sell its stakes in what it considers non-strategic investments in other companies. The company is set to sell its stakes in entities such as Chinese ride-hailing company Didi Global.

UBER Rallies Following CEO’s Statement

Rideshare companies and other travel stocks have been negatively affected by the pandemic, with the demand for their services declining during that period. However, as vaccines and restrictions eased, consumers are traveling again, and ridesharing services are now in demand.

Uber reported 1.64 billion on its platform in the current quarter, up by 9% from the previous quarter and 39% from the fourth quarter of last year. The comment by the CEO sent UBER’s price soaring higher.

At press time, UBER is trading at $37.51, up by more than 5% since the US market opened earlier today. However, year-to-date, the stock has underperformed, down by more than 26% over the past twelve months.

In the past month, Uber has underperformed due to its regulatory troubles in Brussels, the Belgian capital. The ridesharing platform no longer operates in Brussels following the latest court ruling.

Uber Oversold Ahead of Earnings

Uber Technologies Inc. (UBER) reports Q3 2021 earnings after Thursday’s close, with analysts forecasting a loss of $0.16 per-share on $4.41 billion in revenue. If met, earnings-per-share (EPS) will mark 25% of the loss posted in the same quarter last year, when folks avoided ride-share to lower infection risk. The stock rose 3.0% in August after beating Q2 guidance but has added just three points since that time, with structural issues continuing to impact ridership.

Ride-Share Headwinds Persist

Rival Lyft Inc. (LYFT) eased bearish sentiment earlier this week, beating Q3 top and bottom line estimates, but the comparison may not be accurate due to Uber’s major exposure to food delivery, which is now growing at a slower pace due to the resumption of normal day-to-day activities. That venue has become overcrowded as well, at the same time that some municipalities are setting fee limits and restaurants are looking for cheaper alternatives.

Uber raised Q3 earnings guidance in September but the subsequent uptick fizzled out because concerns persist about driver shortages and legislative threats to reclassify workers. The financial press has picked up on this chronic negativity, with a recent New York Times article entitled “For Uber and Lyft, the Rideshare Bubble Bursts” while Business Insider is reporting that neither company has achieved the promised increase in drivers, especially during peak periods.

Wall Street and Technical Outlook

Wall Street consensus has remained wildly bullish despite obvious headwinds, yielding a ‘Buy’ rating based upon 36 ‘Buy’, 4 ‘Overweight’, 4 ‘Hold’, and 1 ‘Sell’ recommendation. Price targets currently range from a low of $35 to a Street-high $82 while the stock is set to open Thursday’s session $24 below the median $70 target. This weak placement highlights investor skepticism about Uber achieving sustained profitability and overcoming legislative challenges.

Uber came public in the 30s in 2019 and sold off to the mid-teens during 2020’s pandemic decline. The subsequent uptick reached the IPO opening print in November, yielding a breakout that posted an all-time high at 64.05 in February. Lower highs and lower lows since that time have relinquished 30% of the stock’s value while price action has failed two tests at the 200-day moving average, which was broken in May. However, monthly relative strength readings have eased off extremely oversold levels, favoring intermediate upside into the low 50s.

For a look at today’s economic events, check out our earnings calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

 

Tesla added to Uber London plan to boost electric car uptake

LONDON (Reuters) – Tesla cars from Wednesday will be available to Uber drivers in London looking to buy or lease a green vehicle as part of an incentive scheme to boost electric car use, the ride-hailing app said.

Since Uber introduced a clean air fee, which adds 3 pence (4 cents) to every mile of a passenger trip in London, more than 135 million pounds has been collected for drivers to use towards environmentally-friendly models at discounted rates with partners such as Nissan and Kia.

Tesla will join the scheme, Uber said on Wednesday, just over a week after announcing a partnership with rental company Hertz to offer 50,000 Teslas as a rental option for its ride-hail drivers by 2023 in the United States.

Over 4,000 Uber drivers have switched to electric vehicles in London, giving the app more fully electric cars there than in any other major global city.

“There is still a lot of work to do to drive a green recovery and clean up urban transport, but the progress we are seeing in London is significant and as a city we are leading the way globally,” said Uber’s Northern and Eastern Europe boss Jamie Heywood.

 

(Reporting by Costas Pitas; editing by Sarah Young)

Best Stocks, Crypto, and ETFs to Watch This Week – GME, Dogecoin and Invesco Solar ETF on the Spotlight

Gamestop Corp. (GME) filed a SEC disclosure after Friday’s close, noting the departure of Chief Operating Officer Jenna Owens after just eight months on the job. Owens, a former Amazon.com Inc. (AMZN) and Alphabet Inc. (GOOG) executive, was hired in March as part of GME’s highly-publicized ‘digital transformation’.  However, the company has offered few details about the initiative since that time and her departure may be viewed as a setback, encouraging shareholders to jump ship.

Investors have lost patience with Uber Technologies Inc. (UBER) after 2020’s strong run-up, contributing to a 14% year-to-date loss. Driver shortages, escalating ride-share fees, government catfights, and heavy food delivery competition may have taken a toll in the third quarter, raising odds for an aggressive ‘sell-the-news’ reaction after Thursday’s post-close report, when UBER is expected to post a 16-cent per-share loss.

Dogecoin (DOGE) rallied out of a deep basing pattern at 16 cents in August, topping out at 35 cents a few weeks later. It posted a higher low in September and bounced once again, nearly completing a 100% retracement into the prior peak on Thursday. The coin has been pulling back since that time but strong support around 25 cents should ease selling pressure, setting up a potential buying thrust that may complete a cup and handle breakout pattern, with an upside target just above 50 cents.

Watch Invesco Solar ETF (TAN) on Wednesday because the passage of President Biden’s massive infrastructure bill may depend on Tuesday’s hotly-contested gubernatorial election in Virginia. The sector has been trading in tandem with acrimonious negotiations for several months now, rallying 31% in the last 19 trading days. A Republican victory may be viewed as a mandate against big government spending, potentially shifting moderate Democratic votes to the ‘no’ column.

Ford Motor Co. (F) joined the EV bandwagon this year, announcing a series of initiatives to compete with better positioned rivals Tesla Inc. (TSLA) and General Motors Co. (GM). The automaker beat Q3 expectations and raised 2021 guidance last week, adding to an uptick that’s posted an impressive 94% 2021 year-to-date return. However, the stock is now approaching resistance going back to 2011, raising odds for a reversal and decline that could last for weeks or months.

For a look at this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.

Uber Sinks to 10-Month Low

Uber Technologies Inc. (UBER) continues to lose altitude, dropping to the lowest low since October 2020. A series of legal setbacks have impacted the ride-share model in recent weeks, forcing shareholders to reconsider exposure while driver shortages generate higher-than-expected costs to keep automobiles on the road. Given these headwinds, it appears unlikely the company will achieve profitability in the fourth quarter, as previously forecast.

Growing Legal and Logistical Headwinds

Uber beat Q2 2021 top and bottom line estimates in early August, posting GAAP earnings of $0.58 per-share, which isn’t comparable to traditional earnings-per-share (EPS) metrics.  Gross bookings rose 114% year-over-year, with Q2 2020’s slow motion recovery translating into easy comparatives. The $509 million EBITDA loss came closer to the quarter’s actual performance, highlighting how hard it is to make money transporting passengers and sandwiches.

August started well enough, with hedge funds Soros Capital, Appaloosa, Glenview Capital, and Third Point Management opening or increasing positions. However, the California Superior Court then struck down November’s gig worker law, setting the stage for driver employee mandates in the U.S.’s most populous state. The New York City council placed caps on food deliveries just days later, with both catalysts likely to encourage additional driver restrictions and higher costs of doing business.

Wall Street and Technical Outlook

Wall Street consensus remains wildly bullish, with a ‘Buy’ rating based upon 43 ‘Buy’, 4 ‘Overweight’, and 3 ‘Hold’ recommendations. One analyst is now recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $34 to a Street-high $81 while the stock is set to open Wednesday’s session just $5 above the low target. This dismal placement suggests Main Street has a better grasp on reality than analysts sitting in their ivory towers.

Uber sold off from 42 to 14 during 2020’s pandemic decline and bounced in a two-wave advance that reached the prior peak in November. It then broke out above the 2019 high at 47.04, stretching to an all-time high at 64.05 in February. It’s been all downhill since that time, failing the breakout while accumulation has plunged to the lowest low in 10 months. The November gap between 36 and 39 looks the magnetic target, suggesting shareholders should expect more pain in coming weeks.

For a look at all of this week’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

Today’s Market Wrap Up and a Glimpse Into Tuesday

Stocks are on a roll, with all three of the major indices closing in the green. The tech-heavy Nasdaq even clinched a fresh all-time high, closing at 14,942, while the Dow Jones Industrial Average and S&P 500 also advanced.

Investors were in a cheery mood after the FDA placed its full stamp of approval on Pfizer’s COVID-19 vaccine. Shares of the pharmaceutical giant climbed approximately 2.5% higher on the day. Now that the drug, which Pfizer made alongside BioNTech, has received the blessing of regulators, Americans who have been holding out might be swayed to get jabbed.

Stock index futures are continuing their upbeat performance in the after-hours market on Monday evening as investors breathe a sigh of relief about the vaccine. The Dow, Nasdaq and S&P 500 futures are all flashing green.

Stocks to Watch

  • Ride-share companies Uber and Lyft were resilient in the face of a setback in a California court. A judge decided that Prop 22, which is a ballot initiative in the state designed to keep gig economy workers as independent contractors rather than employees, is unconstitutional. Companies including Uber, Lyft and DoorDash poured hundreds of millions of dollars into Prop 22, the decision on which they are now expected to appeal.
  • Tech giant Microsoft saw its shares rally to a new record after revealing plans to hike the price on some Office 365 subscriptions next year. Wall Street analysts reacted positively to the new pricing model, suggesting that Microsoft could see a bump in revenue as a result.
  • Shares of Palo Alto Networks are up 10% in after-hours trading on the heels of the tech company’s quarterly results. Palo Alto Networks beat Wall Street estimates on the top and bottom lines as businesses begin to refresh their hardware. The extended-hour gains are notable considering the stock’s year-to-date gains fell below 6% prior to Monday.

Look Ahead

With no sign of the markets slowing down, investors will be looking to see if stocks will extend their gains yet again on Tuesday. Fed officials are a wildcard that could derail the market optimism as they prepare for the annual Jackson Hole symposium, which will be held virtually this year. Fed Chairman Jerome Powell’s keynote address will come on Friday.

Today’s Market Wrap Up and a Glimpse Into Thursday

Stocks tumbled today in response to weaker than expected jobs data. The Dow Jones Industrial Average took the brunt of it, falling more than 300 points and shaving nearly 1% off its value. The S&P 500 was down half a percent while the Nasdaq managed to eke out fractional gains.

Investors were spooked by an ADP jobs report, which revealed that jobs are being added to the private sector at a slower pace than expected. In July, companies added 330,000 payrolls while economists were looking for something along the lines of 690,000. In addition, the outlook for the delta variant isn’t getting any better, and investors are watching and waiting to see if renewed lockdowns will be implemented.

Stocks to Watch

Uber shares are getting punished in extended hours, falling nearly 4% at last check. The ride-share company narrowed its Q2 loss to USD 509 million, but it was still steeper than Wall Street was expecting. Uber and Lyft are both facing driver constraints that have been exacerbated by the resurgence of the virus. On the bright side, Uber had record bookings while revenue grew twofold.

Robinhood shares rallied 50% during the regular session, and according to reports, it was retail investors driving the price higher. Fidelity reportedly had close to 10K buy orders by individual investors early in the session, far outpacing the second most in-demand stock at the broker, GM.

Shares Etsy, an e-commerce site for handcrafted items, dropped 13.5% in extended hours amid signs that the pandemic-fueled shopping boom is winding down. Etsy’s Q2 sales increased by a double-digit percentage but it was less robust than recent quarters. Meanwhile, the company’s Q3 revenue outlook came in below consensus estimates.

Roku’s stock fell more than 8% in the after-hours. The video-streaming hardware company’s Q2 results fell short of estimates as the opening of the economy cut into users’ streaming time. Roku had 55.1 million active users in the quarter across more than 17 billion hours of streaming. The company continues to operate in an uncertain environment while comps from the pandemic year will remain a challenge for the rest of 2021.

Look Ahead

Investors will be on pins and needles until Friday when the employment report for the month of July is released. In the interim, stock futures are barely moving in the after-hours on Wednesday evening, with the three major stock market indexes leaning toward green.

Robinhood on Way to Redemption as Stock Rallies

Shares of trading app Robinhood are defying the odds and proving critics wrong in one fell swoop. After an IPO that left the stock beaten down, shares of Robinhood came back with a vengeance today, rising by a double-digit percentage to USD 45 vs. an issue price of USD 38.

Robinhood has tried to extend an olive branch to retail investors after interfering with the meme stock trade early in the year. The company looked to mend the fence by earmarking up to one-quarter of its shares for users of the zero-commission trading app, which is a higher allotment than Wall Street is used to.

Robinhood vs. Uber

Robinhood saw more than 300,000 customers take part in the IPO, while retail investors more broadly doled out less than USD 19 million for shares on the debut. This compares to close to USD 140 million that individual investors poured into ride-share company Uber’s IPO, as The Wall Street Journal points out. Despite the fact that the stocks trade in separate sectors, retail investors clearly had a greater appetite for Uber shares.

Incidentally, Uber will be reporting its Q2 earnings on Wednesday. The stock is up 2.5% in extended-hours trading on the heels of rival Lyft’s quarterly results in which revenues beat Wall Street estimates.

Robinhood Rally

While there is no clear reason as to why the new stock rallied on Tuesday, investors do appear to be gearing up for options trading in Robinhood, which starts on Wednesday.

 

Robinhood’s IPO has been anything but smooth sailing. Instead, it has been mired in controversy. In addition to the chilly retail investor reception, key management members unloaded the stock leading into the market debut, including CEO Vlad Tenev.

In the hours leading up to the IPO, Tenev sold 1.25 million shares for a payday of roughly USD 45 million, a transaction that was planned. On Aug. 2, another U.S. SEC filing reveals that he kept his finger on the “sell” button before today’s rally. On the flip side, popular investment firm ARK Invest has been scooping up HOOD shares.

While some investors argue that he is within his rights, others are quick to point out that the optics are bad. That’s because Tenev also reportedly said that Robinhood “wants to make first-time investors into long-term investors.”

Uber’s Shares Dip Following A $2 billion Shrink In Its Didi Investment

The shares of Uber ended the day in negative territory after the company’s stake in Didi declined by $2 billion due to regulatory challenges in China.

Uber’s Stake In Didi Drops Massively

Tech company Uber has seen its investment in Chinese ride-hailing giant Didi drop by over 50% in the past few weeks. Uber previously has a $9.4 billion stake in Uber. However, the investment has dropped massively as the Chinese government crackdown on US-listed companies operating in the country.

Didi’s American depositary shares began trading at $14 a share in June on the New York Stock Exchange. However, the price dropped by 21% today and currently trades at $8.02. Uber controls 12% of Didi and is the second-largest investor behind SoftBank. Uber bought the stakes in Didi after selling its Chinese business to the company in 2016.

This latest development led to Uber’s stock price declining earlier today. Year-to-date, Uber’s stock has underperformed. UBER began the year trading at $51 per share but began to decline in May after reaching a yearly high of $62.

UBER stock chart. Source: FXEMPIRE

Didi Comes Under Fire

Didi has come under pressure from regulators in recent months. There was a high around its IPO, and its market cap reached nearly $70 billion. However, it didn’t get to live long in the spotlight as Chinese officials began carrying out a cybersecurity review of Didi. The ride-sharing company was then asked to postpone its listing and reviews its network security.

The company is facing further tough times after Bloomberg reported earlier this week that Chinese regulators are working on punishments against Didi. The regulators could issue a fine that would surpass the record-breaking $2.8 billion Alibaba paid earlier this year.

Some of the other touted penalties would include the delisting or withdrawal of U.S. shares, sources familiar with the matter told Bloomberg. Regulators in China are planning to limit the ability of Chinese companies to list in America and other foreign markets.

Hot Air: Confluent Aims to Become a Value Investment Within a Hype-Driven Tech IPO Market

With sights set on a valuation of around $8.3 billion and snowballing revenue thanks to surges in demand for live streaming software in the wake of the Covid-19 pandemic, Confluent is hoping to secure its future in a successful tech IPO. However, in a market that appears to be largely swept up in hype, can this IPO become a viable investment over the long term?

As part of its IPO, Confluent intends to offer 23 million shares at a price range of between $29 and $33 per share, according to its regulatory filing. The company hopes to raise up to $759 million in its initial public offering.

In the build-up to the IPO, Confluent claimed in its filing that the company’s revenue climbed by around 58% in 2020, and a further 51% over the first quarter of 2021 alone to $77 million. Although the company was valued at $4.5 billion in April last year, the company’s optimistic that it can achieve almost double that sum as it aims to hit an $8.3 billion valuation.

Over-Promising and Under-Delivering Tech IPOs?

Although Confluent’s arrival on the Nasdaq represents an excellent opportunity for the company to generate some revenue to secure its future growth, will investors also identify Confluent’s IPO as a key opportunity to secure long-term windfall?

(Image: VisualCapitalist)

As the data above shows, tech IPOs are by far the leading sector in terms of size, accounting for $21.9 billion in proceeds in 2019 when the data was collected, however, it also averaged out at a post-IPO return of -4.6%.

Does this data mean that tech IPOs are guilty of over-promising and under-delivering simultaneously? Brownstone Research suggests that this gulf between proceeds and investor ROI is down to companies waiting later before they choose to go public.

For instance, companies like Amazon opted to go public before they experienced significant growth. However, private companies in the tech sector today are generally choosing to remain private for longer. This means that when they eventually launch an initial public offering, these tech companies are much larger.

As most tech companies have already undergone their early stages of growth prior to going public, retail investors are liable to be left to pick up the scraps once they enter the public markets.

For instance, when Uber launched an IPO in 2019, its enterprise value of around $75 billion meant that the company was already 171 times larger than Amazon when it launched its initial public offering.

However, the recent IPO bull run of 2020 and early 2021 has helped to embolden more companies to go public sooner rather than later.

(Image: Financial Times)

Thanks to the unprecedented pace in which companies are going public, many tech firms are looking at the revenues they’ve generated in the wake of the Covid-19 pandemic and are aiming to use them to drive investor interest in their listing.

So far in 2021, the number of listings has eclipsed even that of the dotcom boom at the turn of the century – setting the pace for a record breaking year for IPOs.

What does this mean for companies like Confluent and retail investors alike? Well, it points to newfound levels of optimism in companies aiming to go public sooner rather than later, which means that retail investors have the opportunity to invest in more listings that may have more growth potential than usual.

Maxim Manturov, head of investment research at Freedom Finance Europe explains that the playing field between retail and institutional investors is far from level. “It is the latter who usually get the far greater share of an IPO: historically, institutional investors get around 90% of all shares, with only around 10% left for retail trades,” explained Manturov.

“This is where allocation comes from: when the demand is high, the broker will have to reduce order amounts so as to at least partially fill all of them. The allocation ratio, meanwhile, depends on the investor trading activity and volume.”

Confluent Listing Encapsulates Tech IPO Hype

Online brokerages have moved swiftly in accommodating the Confluent IPO and listing it for retail investors to buy.

The Confluent listing shows that one year on from the beginning of the IPO boom, listings are still generating excitement and investor interest at a quickening rate. Although Confluent will be conscious of the hype surrounding tech IPOs, the company will be looking to turn a promising 2020 into a fiscally secure future. If some of that growth can lead to healthy returns for investors along the way, it will be a good sign that the tech IPO boom encapsulates far more than a simple stock market hype machine.

Japan Police Probe Uber Eats for Suspected Breach of Immigration Law – Kyodo

The police sent a notice to the company about alleged unauthorised work by Vietnamese nationals that took place from June to August 2020.

An Uber spokesperson told Reuters the company was “fully cooperating” and that the police investigation could lead to charges from prosecutors.

The company “has taken a number of steps to strengthen onboarding procedures for prospective couriers,” the spokesperson said in a statement.

(Reporting by Chang-Ran Kim and Rocky Swift; Editing by Christopher Cushing and Jacqueline Wong)

Uber To Completely Acquire Grocery Delivery Start-Up Cornershop

American tech company Uber Technologies has announced that it would be purchasing the remaining 47% interest in grocery delivery start-up Cornershop. The acquisition would make Uber the sole owner of the delivery company.

Uber To Acquire Cornershop

Uber announced earlier today that it would be purchasing the remaining 47% interest in grocery delivery start-up Cornershop. The acquisition is a further indication that Uber is expanding its business beyond its traditional ride-hailing venture.

This latest development comes roughly two years after Uber acquired a majority stake in Cornershop for an undisclosed fee. Oskar Hjertonsson, founder and CEO of Cornershop, revealed that Uber already controls more than 50% of Cornershop, and the two companies have been working together to deliver excellent results.

The grocery delivery company already operates in the U.S., Peru, Brazil, Colombia and Canada. According to Hjertonsson, Uber completely owning Cornershop would make it easier to truly unlock the full potential of the company. The acquisition deal is expected to be completed by next month.

Uber Expands Its Eats Segment

The tech company has focused most of its attention on the Uber Eats segment in recent months. The Coronavirus pandemic saw Uber Eats perform excellently as people ordered foods and groceries while at home.

Uber went on to acquire Postmates in July last year after failing to purchase food delivery service GrubHub. The expansion continued with the acquisition of alcohol-delivery service Drizly earlier this year.

The company’s ride-hailing business hasn’t been profitable since it was established. This led Uber to part ways with some of its electric bike and scooter business, Jump. The company also sold its self-driving segment, Advanced Technologies Group, to its start-up competitor Aurora Innovation. Furthermore, Uber also offloaded its flying taxi business, Uber Elevate.

UBER stock chart. Source: FXEMPIRE

Despite the acquisition of Cornershop, Uber’s stock price is down by 2.6% so far today. The stock price could perform excellently in the coming hours as the US market just opened not long ago.

Uber Sees Gradual Return of U.s. Drivers, Modest Decrease in Wait Times

By Tina Bellon

Uber said the week of May 17th marked a new record for drivers returning to the road since the start of 2021, with active driver hours increasing 4.4% from the previous week.

Overall, Uber said 33,000 drivers joined its U.S. platform during the week of May 17th. Most of them had stopped working last year over health concerns and a lack of customers.

Uber declined to say how that number compared to pre-pandemic times, but in California alone Uber reported 209,000 quarterly drivers through the end of 2019.

“With the economy bouncing back, drivers are returning to Uber in force to take advantage of higher earnings opportunities from our driver stimulus while they are still available,” said Carrol Chang, Uber’s head of U.S. and Canada driver operations, in a statement.

Getting drivers on the road quickly is crucial for Uber’s efforts to recoup revenue and achieve its target of adjusted profitability by the end of the year.

The company also faces customers who complain online about long wait times and high booking costs.

Uber has tried to lure drivers back through COVID-19 vaccine partnerships and said in April it would invest $250 million to boost driver earnings and offer payment guarantees.

Including those incentives, median hourly driver earnings in several U.S. cities exceeded $35 before tips, Uber said. The company has urged drivers to take advantage of the incentives before pay drops to pre-COVID-19 levels as more drivers return to the platform.

(Reporting by Tina Bellon in Austin; Editing by Richard Chang)

Uber Launches U.s. Vaccine Rides Program In White House Partnership

By Tina Bellon

Customers who have booked a vaccine appointment can request a ride through the Uber app and either incur no charges if the trip costs less than $25, or receive a $25 discount for their journey, the company said.

Drivers will receive the full payment for the trip, Uber said.

With two of the three COVID-19 vaccines available in the United States requiring two separate shots, Uber would pay a maximum of $100 per passenger under the program. A company spokesman said Uber does not have an estimate for the number of vaccine rides it expects to provide.

U.S. President Joe Biden two weeks ago announced the partnership with Uber and its rival Lyft Inc in an effort to boost COVID-19 vaccination rates at a time when U.S. demand for vaccines has declined.

Many states are offering incentives, from free food and drinks to a chance at winning a lottery, in order to get more Americans to roll up their sleeves for a COVID-19 shot.

Biden has set a target of getting 70% of U.S. adults inoculated by July 4 so the country can be safely reopened for celebrations and small Independence Day holiday gatherings. As of Thursday, 48% of Americans have received at least one vaccine dose, according to the U.S. Centers for Disease Control and Prevention.

For Uber and Lyft, the vaccine efforts also come as the companies seek to have drivers and riders return to the road and recover revenue lost during the pandemic.

Lyft has said customers booking a vaccine ride will receive a $15 discount per trip.

The nationwide rides discounts build on existing vaccination programs Uber and Lyft launched at the end of last year to assist vulnerable communities lacking healthcare and transportation access.

(Reporting by Tina Bellon; Editing by Bill Berkrot)

 

Earnings Preview: Uber to Drive Past Pandemic Woes?

Even as broader stock markets have been celebrating the reopening of the US economy, Uber’s stock prices were noticeably more sanguine. The stock has been relatively range-bound over the past two months, with the stock finding a close above $60 unsustainable since posting its highest ever closing price on 10 February. The stock has fallen by over 16% since.

Treasury Secretary Janet Yellen spooked some segments of the US stock market on Tuesday with comments that hinted at rising interest rates to curb an overheating economy. The selloff in tech stocks contributed to Uber’s share price closing below its lower Bollinger band.

That in itself may not be such a bad thing for technical traders.

Uber bulls might take heart from such a technical event because the last time the stock closed below the lower bound of the band, it went on to stage a massive rally of over 35% in just over two weeks! Also, over the past 12 months, the stock has found its forays below its 100-day simple moving average (SMA) to be fleeting.

Perhaps in that regard, this stock is akin to a coiled spring, raring to be propelled higher from such oversold conditions, with Wednesday’s announcement potentially serving as the trigger.

Though with momentum firmly pointing south, Uber appears in need of a major vote of optimism from the markets before we can say with conviction that a new record high is coming into view.

Is the pandemic finally in Uber’s rearview mirror?

For the quarter, markets are expecting Uber’s revenue to come in at $3.25 billion, which would mark a gradual increase from the past two quarters, though still 8.2% lower year-on-year.

The bigger boost likely came from some pandemic-era habits that have stuck around. Uber’s delivery services increased by 150% year-on-year in March, which helped the company post a record high for its monthly gross bookings!

Still, Uber’s net loss for Q1 is forecasted at around $1.05 billion, with investors wanting to know how such numbers might impact the company’s repeated forecasts of achieving profitability by year-end.

Winding road ahead

In its pursuit of profitability, Uber is also set to face some near-term challenges. The company has set aside an extra $250 million to lure drivers back with, as the demand resurgence outpaces the number of drivers who’s willing to return to such gigs. That figure could erode its bottom line in the coming quarters.

Also, Uber may have to contend with higher operating costs if regulators are to have their way. Just last week, US Labor Secretary, Marty Walsh, said that gig workers should be classified as “employees”, which raises the prospects of the likes of Uber being saddled with the compliance costs to employment law. In March, Uber reclassified all its drivers in the UK as “workers”, and the entitled benefits to drivers would cost the company about $300 million per year, according to Morgan Stanley estimates.

Raring to grow

Still, it’s not all doom and gloom for Uber’s outlook.

Besides riding on the global economic reopening, Uber plans to also aggressively grow its delivery services across the US over the coming months, reportedly in partnership with GoPuff, a startup that focuses on deliveries. Such a move would help bolster its deliveries offerings, following its $2.65 billion acquisition of Postmates last year.

There are also plans to roll out Uber Eats Germany, expanding its foray on the continent beyond existing markets in Spain, France, Poland, and the UK. Uber is also partnering with a London-based EV maker to produce cars for ride-hailing by Q3 2023. Such ambitions could help Uber diversify its income streams, both geographically and also across varying segments.

How could Uber’s shares react post-earnings?

Markets think that the stock could move by 8.43% when the US cash session reopens after Uber’s Q1 earnings have been released. Uber’s shares already gained 3.6% in extended trading on Tuesday, climbing alongside the stock prices of its rival, Lyft, which announced its own results after markets closed.

Those who believe in Uber’s long-term prospects must gain enough critical mass in order for the stock to hit a new record high. At least for the near-term, investors can take heart that, as the Covid-19 vaccine continues permeating major economies, that should help bolster Uber’s core business as people grow more comfortable hopping back into an Uber for their trips back to work, school, or out about town.

Written on 05/05/2021 06:00 GMT by Han Tan, Market Analyst at FXTM

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UK’s Arrival, Uber to Develop Electric Ride-Hailing ‘Arrival Car’

By Nick Carey

Arrival and Uber will also explore a strategic relationship in key markets, including the United Kingdom, European Union and United States.

The “Arrival Car” will be an “affordable, purpose-built electric vehicle for ride-hailing,” and will go into production in the fourth quarter of 2023, the companies said.

Uber plans to be a fully electric mobility platform in London by 2025, and across North America and Europe by 2030. The company has raised more than 135 million pounds ($188 million) to help its drivers in London upgrade to an electric vehicle by 2025.

“Our focus is now on encouraging drivers to use this money to help them upgrade to an electric vehicle, and our partnership with Arrival will help us achieve this goal,” Jamie Heywood, Uber regional manager for northern and eastern Europe, said in a statement.

Uber aims to sign up an additional 20,000 drivers in Britain as the lifting of COVID-19 restrictions boosts demand, the ride-hailing app said last week.

In March, Uber gave its existing 70,000 UK drivers workers’ rights, including the minimum wage, after it lost a Supreme Court case.

The Arrival Car will need to withstand the high demands of an Uber driver – ride-hailing cars drive up to 50,000 kilometers (31,070 miles) annually, versus 12,000 km for the average car.

The companies said the Arrival Car will prioritize “driver comfort, safety and convenience, while ensuring the passengers enjoy a premium experience.”

Arrival went public in March via a merger with a special purpose acquisition company (SPAC). The startup has so far specialized in electric vans and buses, and its biggest public order is for up to 10,000 vans for United Parcel Service Inc, which also owns a stake in Arrival.

“We have a great partnership with UPS … and we hope to replicate that success with Uber as we develop the best possible product for ride hailing,” Arrival Senior Vice President Tom Elvidge, formerly a manager at Uber, said in a statement.

The Arrival Car will use the “Small Vehicle Platform” the startup referenced in its investor presentation prior to going public.

Arrival said the car would be “affordable,” but did not divulge pricing.

($1 = 0.7194 pound)

(Reporting by Nick Carey in London; Editing by Matthew Lewis)

Uber Looking Good Ahead of Report

Uber Technologies Inc. (UBER) reports Q1 2021 earnings next week, with analysts looking for a loss of $0.37 per-share on $3.26 billion in revenue. If met, loss-per-share will be one-fifth of the loss posted in the same quarter in 2020, when lockdowns brought the ride share business to a grinding halt.  The stock fell nearly 4% in February after posting a large Q4 loss and missing revenue estimates and has drifted sideways in a triangle pattern since that time.

Post-Pandemic Ride Share

Optimism is growing that ride share will return to pre-pandemic levels in coming months, at least in the United States, complementing Uber’s rapidly growing footprint in delivery and other transportation services. Key acquisitions in grocery and alcohol delivery should add to revenue, helping the company achieve its first quarterly profit by the end of the year. Slow vaccine uptake in Europe remains the wild card, potentially hurting the bull case.

Needham analyst Bernie McTernan posted a ‘Buy’ rating and $77 target on Tuesday, noting “We see the potential for the move up the adoption curve in delivery during the pandemic to be sticky and look for Uber to benefit from its expansion into other verticals like grocery and alcohol, where recent acquisitions should help drive share quickly. With mobility returning to 2019 levels as the economy reopens, we like how the market appears focused on profitable US growth”.

Wall Street and Technical Outlook

Wall Street consensus has lifted to a ‘Buy’ rating in 2021, based upon 32 ‘Buy’, 2 ‘Overweight’, and 5 ‘Hold’ recommendations. One analyst still recommends that shareholders close positions and move to the sidelines. Price targets currently range from a low of $30 to a Street-high $82 while the stock is set to open Tuesday’s session more than $15 below the median $74 target. A smaller-than expected loss could provoke a buy-the-news reaction, given this humble placement.

Uber came public in the 40s in May 2019 and sold off to an all-time low in March 2020. A two-legged bounce reached 2019 resistance in November, yielding a breakout and rally to an all-time high at 64.05 in February 2021. Price action since that time has carved a symmetrical triangle on top of new support, with a rally above 61.50 setting off buy signals while a decline through 54.50 favors even lower prices. At this point, the smart money is betting on higher prices.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication.