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Why Is Uber (UBER) Down 25.9% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Uber Technologies (UBER). Shares have lost about 25.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Uber due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Uber Incurs Loss in Q2

The company incurred loss of $4.72 per share in the second quarter of 2019, wider than the Zacks Consensus Estimate of a loss of $3.33. Moreover, the amount of loss increased year over year. Results were affected by heavy expenses on sales, promotions and marketing to attract riders as well as drivers. These expenses totaled $1.22 billion in the quarter, up 71% year over year.

What’s worse is that the company has warned of the huge losses to persist through 2019 since this will be its “peak investment year”. However, losses are anticipated to be reduced in 2020 and 2021. Moreover, Uber's CEO expects revenues to grow at around 30% in the second half of 2019.

Detailed Results

Although revenues climbed 14% year over year to $3,166 million, the same missed the Zacks Consensus Estimate of $3,407 million.

In the second quarter, majority (93.8%) of the company’s revenues came from Core Platforms. Within the Core Platforms unit, ridesharing revenues inched up 2% to $2,348 million with gross bookings ascending 20%. Uber Eats revenues jumped 72% to $595 million with gross bookings surging 91%.

Core Platform revenues grew 19% in the United States and Canada to $1,776 million and 22% in Europe, the Middle East and Africa to $502 million. While Core Platform revenues increased 13% in the Asia Pacific region to $276 million, the same dropped 24% in Latin America to $417 million.

At the Core Platforms segment, gross bookings surged 30% while the measure soared in excess of 100% at the company’s Other Bets segment. In the quarter, total gross bookings increased 31% to $12.01 billion. Monthly active platform customers grew 30% to 99 million in the same period.

Additionally, cost of revenues (excluding depreciation and amortization) at Uber rose primarily due to higher driver incentives. In fact, Uber is also spending significantly on promotions and driver incentives in a bid to gain a market share similar to Lyft.

Uber exited the second quarter with cash and cash equivalents of $11.74 billion compared with $6.41 billion at the end of 2018. Long-term debt, net of current portion, at the end of the quarter stood at $4.53 billion compared with $6.87 billion at 2018 end.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

Currently, Uber has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Uber has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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