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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.
This article was originally posted on FX Empire