Why Is Uber (UBER) Stock Soaring Today
What Happened:
Shares of ride sharing and on demand delivery service Uber (NYSE: UBER) jumped 12.1% in the morning session after peer, Lyft reported fourth-quarter results indicating growing users, enabling it to beat Wall Street's revenue and EPS estimates. Lyft reported that Rides growth accelerated for the fourth quarter in a row to 26% year on year in the quarter. In addition, Lyft's guidance for Q1 2024 came in ahead of expectations for gross bookings (from which the company generates revenue by taking a cut) and adjusted EBITDA, showing that both near-term growth and profits are better than expected. Lastly, Lyft expects to generate positive free cash flow for the full year 2024, converting roughly half of its forecasted full-year EBITDA into cash. This is a nice milestone. Overall, the results demonstrate a strong demand for ride-sharing services amid worries about a slowing economy.
In addition, Uber announced its first ever share repurchase program of up to $7 billion of its common stock authorized by its Board of Directors. CFO Prashanth Mahendra-Rajah added "Today's authorization of our first-ever share repurchase program is a vote of confidence in the company's strong financial momentum. We will be thoughtful as it relates to the pace of our buyback, beginning with actions that partially offset stock-based compensation, and working towards a consistent reduction in share count."
Also, the company provided an updated financial outlook for the coming years. It expects gross bookings growth in the mid to high teens over the next three years. In addition, adjusted EBITDA is expected to accelerate at more than two times gross bookings growth (in the high 30s to 40% (CAGR)). Lastly, free cash flow is projected at over 90% of adjusted EBITDA annually over the three-year period. The forecasts demonstrate the company's resolve toward balancing growth and profitability, which is being cheered by the market as it represents an improvement over the early days of weak profitability and cash burn.
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What is the market telling us:
Uber's shares are somewhat volatile and over the last year have had 7 moves greater than 5%. But moves this big are very rare even for Uber and that is indicating to us that this news had a significant impact on the market's perception of the business.
The biggest move we wrote about over the last year was 10 months ago, when the stock gained 10.8% on the news that the company reported first-quarter results that surpassed analysts' revenue, free cash flow, and earnings per share estimates. Adjusted EBITDA also beat, and gross bookings was inline. In addition, gross bookings and adjusted EBITDA guidance came in above the Consensus estimates. Overall, it was a healthy quarter for the company, with an improved margin and cash position.
Uber is up 31.2% since the beginning of the year. Investors who bought $1,000 worth of Uber's shares at the IPO in May 2019 would now be looking at an investment worth $1,843.
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