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