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. 

Uber Under Pressure on UK Minimum Wage in Test of Gig Economy

By Costas Pitas

Following a UK Supreme Court defeat last month, the Silicon Valley-based company reclassified its more than 70,000 drivers in Britain as workers, meaning they are guaranteed entitlements such as holiday pay.

Uber said drivers will be at least 15% better off, if they opt into the pension plan.

On the minimum wage, which stands at 8.72 pounds ($12.13) per hour for those aged 25 and over, Uber said it would apply “after accepting a trip request and after expenses” and that on average drivers earn an hourly 17 pounds in London.

Drivers will not receive it while waiting for a passenger request, which can account for as much as a third of the time drivers are behind the wheel with the app turned on, according to several U.S. studies.

James Farrar and Yaseen Aslam, the two lead drivers in a 2016 employment tribunal case that Uber unsuccessfully contested all the way to Britain’s top court, criticised the move.

“Uber drivers will be still short-changed to the tune of 40-50%,” they said.

“Also, it is not acceptable for Uber to unilaterally decide the driver expense base in calculating minimum wage.”

Uber said it has consulted with thousands of drivers who do not want to lose the flexibility they enjoy of “if, when and where they drive.”

Workers are entitled to fewer rights than those classed as employees, who also receive sick pay and parental leave. Uber in California pushed and won a similar compromise on drivers’ status.

GIG ECONOMY SHAKE-UP?

Uber has been forced to pull out of some markets after opposition from regulators and operators.

France’s top court in 2020 recognised the right of an Uber driver to be considered an employee while European Union regulators are considering new rules to protect gig economy workers.

Drivers in the British litigation were working for Uber during “any period when the driver was logged into the Uber app within the territory in which the driver was licensed to operate and was ready and willing to accept trips,” according to a Supreme Court press summary.

Farrar suggested there may be more legal action.

Uber’s Northern and Eastern Europe boss Jamie Heywood defended the firm’s plan.

“If we decided that logged-on time on the app was also working time, that would mean that we would need to introduce shifts telling drivers when they can work, which most drivers don’t want to do, and we’d also need to introduce exclusivity terms,” he told Sky News.

He declined to say what the total cost would be to the firm but said they are committed to remaining competitive on pricing and would be communicating with drivers in the next few days over settlements for historic trips.

Morgan Stanley said it estimated the hit to core earnings at around $300 million in 2021/22, as it assumed that the cost will not be passed onto consumers in the near term.

Uber’s announcement could also put pressure on others in the gig economy, where millions of people tend to work for one or more companies on a job-by-job basis.

Rival taxi service Addison Lee and food delivery firm Deliveroo have both been subject to legal action over workplace rights.

“The new phase of our economy should be about protecting workers’ rights, driving higher standards, driving new technologies,” British business minister Kwasi Kwarteng said.

(Reporting by Costas Pitas; editing by James Davey, Louise Heavens and Toby Chopra)

U.S. Market Wrap and Forecast for Friday

The SP-500 and Nasdaq-100 indices gapped into tests of Wednesday’s highs at the start of Thursday’s U.S. session and sold off, grinding out narrow range congestion patterns. A slumping VIX matched mixed price action, with indecision a bigger market mover than buyers or sellers.  Commodities pulled back after crude oil’s assault on multi-month highs mid-week, marking one of the few highlights of an otherwise dull Thursday market.

Uber Does U-Turn

Uber Technologies Inc. (UBER) dropped like a rock and shook out short sellers after the delivery disruptor reported another quarterly loss on a steep revenue decline. Even so, a company spokesman reaffirmed guidance for positive EBITDA, better known as ‘profitability’, by the end of fiscal year 2021. Unfortunately for bulls, aggressive sellers returned midday and knocked the stock back into a 4% loss and a test of new support around 60.

The lazy but bullish tape continues while everyone knows that major benchmarks are glued to overbought levels in anticipation of a $1,400 stimulus bill passing into law. The impeachment trial is just a distraction in this scenario, forcing market players to bide their time until the theatrics draw to a close. Ominously, stocks at all capitalization levels are priced for perfection, setting up  ideal conditions for a shakeout of weak hands.

Looking Ahead to Friday

Dow component Walt Disney Co. (DIS) reports earnings after Thursday’s close. The stock trades at 71.7x forward earnings and is expected to report a Q1 2021 loss of $0.34 per-share on $15.9 billion in revenue. DIS reported a loss of $0.65 per-share in November’s Q4 report, along with a 26.2% y/y revenue decline. Despite those results, the new crowd obsessed over the 194% y/y Disney+ and ESPN+ sub bookings. That made no sense, with income dependent on sidelined movie franchises.

The consumer sentiment report on Friday morning is unlikely to be a market mover. Next week is mid-quarter options expiration, perhaps generating some volatility in the short interest small caps that were going to change the world less than two weeks ago. Somehow, I don’t think a Reddit fan’s boast that Gamestop will trade between 500 and 800 next week will find its way into the ticker tape.

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.

Uber Shares Slump in After-Hours as Earnings Miss Estimates But Eats Business Reduce Losses

Uber Technologies’ shares fell about 5% in extended trading on Wednesday after the ride-sharing company missed Wall Street expectations on revenue and profit in the fourth quarter of 2020; however, it managed to post narrower loss due to its growing food delivery business amid the COVID-19 pandemic.

San Francisco-based Uber Technologies reported a quarterly adjusted loss of $0.54 per share, slightly missing the market consensus estimate for a loss of $0.53 per share. The company’s revenue declined more than 20% to $3.17 billion from the same period a year ago​, missing the Wall Street estimates of $3.58 billion.

Uber reported mixed fourth-quarter results as the firm missed top-line expectations but beat FactSet consensus estimates on the bottom-line. Delivery net revenue growth accelerated again while the decline in mobility revenues lowed for the second consecutive quarter. While the firm awaits a post-pandemic world which likely will return its mobility segment back to growth, that business remains profitable on an adjusted EBITDA basis,” said Ali Mogharabi, senior equity analyst at Morningstar.

“On the delivery segment side, we think Uber’s various acquisitions, which will help the firm provide on-demand delivery service for products beyond meals, are strengthening its network effect and should drive further progress toward profitability. We have slightly increased our projections and rolled our model forward, increasing our fair value estimate to $67 from $61. While the stock is trading at a discount to our fair value estimate, we recommend new investors wait for a wider margin of safety before allocating capital to this narrow-moat name.”

Uber shares, which surged over 70% in 2020, fell about 5% to $60.14 in extended trading on Wednesday.

Uber Stock Price Forecast

Twenty-one analysts who offered stock ratings for Uber in the last three months forecast the average price in 12 months $63.76 with a high forecast of $80.00 and a low forecast of $50.00.

The average price target represents a 0.92% increase from the last price of $63.18. All those 21 analysts rated “Buy”, according to Tipranks.

Morgan Stanley gave a base target price of $68 with a high of $85 under a bull scenario and $35 under the worst-case scenario. The firm currently has an “Overweight” rating on the ride-sharing company’s stock.

Several other analysts have also recently commented on the stock. BTIG raised the price target to $80 from $70. Keybanc upped the price objective to $75 from $63. Canaccord Genuity increased the price target to $75 from $65. Uber Technologies had its target price increased by analysts at KeyCorp to $63 from $60. The firm presently has an “overweight” rating.

In addition, Cowen raised their target price to $64 from $58 and gave the stock an “outperform” rating. Needham & Company LLC raised their target price to $60 from $50 and gave the stock a “buy” rating. Loop Capital raised their target price to $59 from $40.

Analyst Comments

Uber is a truly global platform with multiple large addressable markets. We see a path forward for both ridesharing and Eats bookings growth, primarily driven by MAPC and frequency growth. We forecast fairly flat ridesharing ANR take rates (albeit on a growing gross booking base) and significant growth in Eats ANR take rate, driven principally by order velocity and positive restaurant mix,” said Brian Nowak, equity analyst at Morgan Stanley.

Uber‘s scale and liquidity gives drivers higher earnings power and riders lower wait times. Uber‘s platform approach allows it to rapidly expand into new business lines (Eats, Freight) and leverage shared expenses.”

Check out FX Empire’s earnings calendar

Uber Near All-Time High Ahead of Report

Uber Technologies Inc. (UBER) reports Q4 2020 earnings after Wednesday’s closing bell in the United States, with Wall Street analysts looking for a loss of $0.39 per-share on $3.59 billion in revenue. If met, loss-per-share will be about half the loss posted in the same quarter last year. The company hasn’t reported a quarterly profit since coming public in May 2019 but expects to be profitable by the end of this year.

Next Up: Alcohol Delivery

The ride-share superstar has been busy as a bee in recent months, scooping up smaller operations to build new opportunities in the fast-growing delivery market. It just announced the purchase of alcohol delivery service Drizly for approximately $1.1 billion in cash and stock, opening a lucrative new venue. The service will be available in more than 1,400 cities across a majority of states and will be fully complaint with local jurisdictions.

CEO Dara Khosrowshahi updated Uber’s acquisitions and initiatives in an interview last week, noting that UberEats has been a very successful part of the platform during the pandemic. She discussed the acquisition of Drizly, stating the new service will extend its lead in the alcohol delivery industry. Uber intends to broaden delivery services after the pandemic, according to the CEO, but also stated it won’t deliver cannabis until the Federal government legalizes weed.

Wall Street and Technical Outlook

Wall Street consensus has been pristine since California voters overturned an attempt to designate Uber drivers as employees in November. It’s currently rated as a ‘Strong Buy’ based upon 22 ‘Buy’, 0 ‘Hold’, and 0 ‘Sell’ recommendations. Price targets currently range from a low of $49 to a Street-high $80 while the stock has opened Monday’s U.S. session about $3 below the median $62 target.

The stock broke out above the June 2019 high at 47.08 in November 2020 and topped out at 60.03 on Jan. 14. Accumulation readings supported the two-month advance, tick by tick. An 8-day 13-point decline attracted committed buyers, generating a strong bounce that mounted the prior peak by 4 cents on Monday morning. Price action could pause around this level into Wednesday’s release, which could easily generate a strong ‘buy-the-news reaction.

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. 

Uber On Fire After California Vote

Uber Technologies Inc. (UBER) soared more than 10% overnight after California voters passed Proposition 22, allowing ride-share drivers to continue classification as independent contractors, rather than employees entitled to a host of benefits. The company and rival Lyft Inc. (LYFT) argued the measure would undermine their fragile business models, forcing Californians back into taxis and other traditional riding methods.

Uber Earnings On Tap

The timing couldn’t be better. Uber reports Q3 2020 earnings after Thursday’s closing bell, with analysts expecting a loss of $0.49 per-share on $3.18 billion in revenue. The company expected to post its first profit at the end of 2020 but the pandemic delivered a knock-out blow, inducing thousands of customers to avoid the service. Fortunately, UberEats has picked up the slack, with at-home food delivery orders surging as result of social distancing.

Market watchers will be listening closely to the conference call, hoping Uber forecasts a new profitability date. CEO Dara Khosrowshahi recently suggested that milestone will take longer than expected, guaranteeing new protections to workers if the measure passed, including 30 cents per mile for gas and other vehicle costs, healthcare subsidies for drivers who work 15 hours or more a week, and occupational-accident insurance coverage while on the job.

Wall Street And Technical Outlook

Wall Street has grown increasingly bullish on the company’s long-term outlook in 2020, with a consensus ‘Strong Buy’ rating based upon 20 ‘Buy’ and 2 ‘Hold’ recommendations. No analysts are recommending that shareholders close positions and move to the sidelines. Price targets currently range from a low of $34 to a Street-high $50 while the stock is set to open Wednesday’s U.S. session about $1 below the $41 median target.

A rally into February 2020 stalled six points below 2019’s all-time high at 47.08, giving way to a steep decline that posted an all-time low in the teens in March. The subsequent bounce ended in the upper 30s in June, yielding 5 months of sideways action, followed by a post-election uptick that’s now reached within 40 cents of the February peak. Accumulation readings are testing 2020 highs at the same time, raising odds the stock will head into a test of resistance in the upper 40s.

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

Disclosure: the author held Uber shares at the time of publication.

 

 

Uber Beefs up for Food Fight with $2.65B Acquisition

After the announcement, Uber’s stock jumped six percent on Monday, bringing its advance to nearly 129 percent since its record low on March 18. Having gained over 10 percent since the extended 4th of July weekend, Uber’s shares have also outpaced the week-to-date gains seen respectively in the S&P 500 and the Nasdaq.

Shareholders are hoping that this acquisition would also bolster Uber’s plans for reaching its first-ever quarterly profit, with such ambitions derailed after its global ride-hailing business fell by 70 percent in the wake of the pandemic. Gross bookings registered its first-ever quarterly drop in the January-March period this year, as the orders to stay at home dealt a massive blow to the travel and transportation industry.

Growing appetite for food deliveries, and more

The pandemic however boosted demand for food deliveries, which soared by 52 percent in gross bookings to US$4.68 billion in Q1. The segment also accounted for 23.1 percent of Uber’s gross revenue for the quarter, higher compared to the 18 percent contribution in the prior three-month period, according to Bloomberg data. Postmates’s food-delivery bookings rose about 67 percent in Q2, according to Uber CEO Dara Khosrowshahi.

Set against such a context, it’s of little wonder that Uber is willing to place a bigger bet on the food deliveries segment, as its core offerings contend with the strong headwinds stemming from the pandemic. And with this consolidation in the food deliveries space, there could eventually be some upward pressure on prices as the market discovers its new equilibrium, which bodes well for this Uber segment’s top line.

Beyond bolstering its food deliveries segment, Uber is also hoping to leverage on Postmates’s strength in its online delivery offerings, which brings groceries and daily essentials, among other things, right to customers’ doorsteps. Also this week, Uber rolled out its in-app grocery delivery services for select Latin American and Canadian cities, as it partners with Cornershop, the Chile-based grocery delivery startup in which Uber agreed to take up a majority stake last year.

Uber’s emphasis on delivery-as-a-service should give the company another leg to stand on in its quest for profitability, especially if changed consumer habits from the lockdown-era (i.e. customers are less wiling to venture out of their homes) become sticky.

A sure path to profitability?

Back in May, Khosrowshahi said that the initial timeline for churning out the company’s first-ever adjusted quarterly profit has been pushed back from this year to 2021. To hasten its path to profitability, Uber has reduced over US$1 billion in expenses, getting rid of some non-core businesses while having shed more than a quarter of its staff.

While awaiting the potential synergies to materialize from this combo of profitless companies, with the deal only expected to be sealed in the first quarter of 2021, shareholders are likely to keep themselves busy in the interim, assessing how Uber is faring amid the double-edged sword that is the global pandemic. The impact of Covid-19 is likely to be more pronounced in Uber’s Q2 earnings release slated for August.

It remains to be seen whether shareholders will have the patience to wait for the promise of things to come, and potentially send Uber’s shares much higher from current levels. If it’s anything like I’ve discovered during quarantine, the wait can sometimes be agonizing, akin to trying to supress one’s hunger pangs while waiting for the food delivery order to arrive.

Written on 07/09/20 09:00 GMT by Han Tan, Market Analyst at FXTM


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Europe and US Join in on China’s Rally, Home Builders Jump

Europe

A securities journal that is controlled by the Chinese government ran a front-page editorial which mapped out the prospect of a bullish run in stocks, and that triggered buying in domestic equities. The CSI 300, rallied over 5%, and it closed at its highest level since 2015. The positive mood from China influenced dealers in this part of the world, even though the health crisis is still a major worry. On Saturday, the WHO claimed there was over 212,000 new cases of Covid-19, a new daily record. The Beijing authorities can’t talk up their own market forever, so it is likely in the next few days, the pandemic will be back in centre-stage as far as traders are concerned.

The UK house builders are enjoying a positive move today as it is believed the government will change the stamp duty rules in a bid to encourage activity in the sector. Under the existing scheme, if you purchase a property in England or Northern Ireland worth more than £125,000, you incur stamp duty, unless you are a first time buyer. There is talk the threshold could be raised to £500,000, and it might last for up to six months. There is talk that Rishi Sunak, the Chancellor of the Exchequer, will reveal the plans on Wednesday, with the intention of it being a part of the Autumn budget. Redrow, Vistry and Persimmon shares are in demand today.

Sticking with the house builders topic, Barratt Developments, confirmed that annual completions tumbled by over 29% to 12,604. Average selling prices were a touch higher at £280,000. The lockdown was blamed for the drop-off, but it in starting the new financial year with ‘cautious optimism’, as the full year order book stands at 14,326, up from 11,419 last year. The company has over £300 million in cash, it has access to £700 million in a credit facility, and it is eligible to tap into the Covid Corporate Financing Facility, so it is well positioned to work its way through its busy order book.

Rolls Royce shares clawed back some of the ground it lost on Friday when it announced it was reviewing potential options to strengthen its balance sheet. The engineering giant was already in a weakened position in advance of the pandemic on account of the issues in relation to the Trent 1000 engines.

The company supplies aircraft engines so the travel bans and the bleak outlook for the aviation industry compounded the firm’s problems. At its update in April, the group confirmed its liquidity position stood at £6.7 billion – which was a result of two rounds of financing. The group is clearly comfortable in terms of liquidity, and it seems like some restructuring is in the pipeline. Keep in mind, it warned about cutting 9,000 jobs in May.

DS Smith shares are in the red today as Jefferies downgraded the stock to hold from buy, and cut the price target to 310p from 350p. Last week the company posted a 5% increase in adjusted pre-tax profit, but it cautioned it was too soon to return to paying dividends.

Antonio Horta-Osorio, the CEO of Lloyds, will step down in June 2021. Mr Horta-Osorio has been in the top job for a decade. Under his leadership he turned the group around from a bank which was reeling from the credit crisis, and part-nationalised, to a fully private firm and a dividend payer.

Boohoo shares have fallen out of fashion after it was reported that one of its suppliers paid its staff poorly and the working conditions were substandard too. The group has become very popular recently as its fast fashion strategy combined with its online only model has been a hit with younger consumers.

The much-awaited ‘Super Saturday’ didn’t seem to be that super, as the re-opening of pubs and restaurants wasn’t the big deal that some people were predicting. Restaurant Group and Mitchells & Butlers are in the red.

US

The mood on Wall Street is positive as the US economy continues to rebound. The final reading of the services PMI report for June was 47.9, and keep in mind the May reading was 37.5. The ISM non-manufacturing reading was 57.1 – its highest level since February.

It was reported that Uber has acquired Postmates, the food delivery group, for $2.65 billion. Uber Eats is a direct competitor of the company but it is believed the two businesses will remain separate. There might be a merger of back-end technology. Last month merger talks between Uber and Grubhub fell apart due to antitrust issues, but the latter teamed up with Europe’s Just Eat.

Dominion Resources shares are in the red after it was announced the company has agreed to sell off its gas storage and transition network to Berkshire Hathaway, Warren Buffett’s, investment vehicle, for $4 billion. Mr Buffet’s firm will take on $5.7 billion of the group’s debt too, so the transaction comes to nearly $10 billion. In other news, Dominion and Duke Energy scrapped their plans for the Atlantic Coast pipeline project on account of rising costs.

Amazon shares have topped $3,000 for the first time as the tech giant asserted its dominance during the lockdown. It had the edge retailers that were forced to close.

FX

The risk-on sentiment of traders as weighed on the US dollar. In the past few months, the greenback has become a popular safe-haven play, and given the surge in equities today, we are seeing dealers dump the US dollar. The currency received a nice boost towards the end of last week on the back of the better-than-expected jobs report form the US. Today, currency traders are less interested in the recovery in the US economy, as they are fixated on the overall risk-on mood.

EUR/USD and GBP/USD have been helped by the negative move in the greenback. The UK construction PMI reading for June was 55.3 – it’s highest in nearly two years. The eurozone retail sales update for May was 17.8%, and that was a big improvement from the -12.8% in April.

Commodities

Gold has been nudged up by the dip in the drop in US dollar. The commodity’s inverse relationship with the dollar is working in its favour today. The metal has a history of attracting safe haven funds, but seeing as dealers are keen to take on more risk today, it is likely that gold’s positive move is almost exclusively down to the weakness in the dollar.

The optimism that is doing the rounds in relation to stocks seems to be influencing oil traders too. Equity markets and energy products have broadly moved in tandem in the past couple of months and it seems the lack of nerves in stocks has helped sentiment in WTI and Brent crude. The stark news from the WHO over the weekend that there was a new record set of new Covid-19 cases has been shrugged off by equity and energy traders alike.

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

By David Madden (Market Analyst at CMC Markets UK)