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Uber beats Q3 earnings expectations powered by growth in Eats business

Angelo Zino, Senior Industry Analyst at CFRA Research, joined Yahoo Finance to break down Uber's Q3 earnings.

Video Transcript

ADAM SHAPIRO: --with Angelo Zino. He is senior industry analyst at CFRA. Angelo, good to have you here. And it's decline, decline, decline. We expect that because of the pandemic. But the adjusted net revenue declined 20% year over year. Yeah, we need a vaccine to turn it around, but are they at least getting through the worst of this?

ANGELO ZINO: So I think as far as the rides business is concerned, their mobility business, I mean, clearly, it does look like the worst is over, at least at the moment. I mean, the bottom was in Q3. We've kind of seen a nice sequential kind of uptick here in Q3. Year over year, though, the numbers within that kind of mobility business still down north of 50%. So it's still an ugly business.

Thankfully, they do have kind of the offset in terms of their delivery business, which more than doubled and continues to be a very bright spot for the overall company.

SEANA SMITH: Angelo, going off of that, the stock is off 3% here after hours. What does Wall Street care the most about? Is it the fact that Uber has been able to pivot its business somewhat here and offset the drop that we've seen in the ridership business? Is it profitability? I mean what stands out to you as an analyst covering this stock?

ANGELO ZINO: Yeah, I mean, I think at this point, what the Street really wants to see is a little bit more momentum within the ride side of things than mobility side of things. You haven't seen it necessarily yet. I mean, clearly, you have seen it off the bottom, but there's a lot of concern going into Q4. Of course, it would be nice to kind of see what the commentary will be from Uber here later on. But we kind of need to know a little bit of the trajectory going into those winter months.

As an analyst, what we really care most about is when they can actually kind of turn the corner here and return or actually see adjusted EBITDA profitability. And one thing that they did highlight within the release was that, hey, listen. By the end of 2021, we expect to get there. We continue to think you'll see it by Q3 of next year.

ADAM SHAPIRO: If Q3 of next year-- and that would be assuming we still get-- we're seeing it spike, the COVID crisis. But people are using Uber even in the middle of that. They're using the rideshare. So when they tell you 2023, was it, that that's a legitimate-- you believe them when they say it, despite the increase in pandemic.

ANGELO ZINO: So in terms of adjusted EBITDA profitability, we're looking Q3 of next year.

ADAM SHAPIRO: Oh, next year.

ANGELO ZINO: We do think they hit that-- we do think we get it at that point. Worst case scenario, by the end of next year, which will be a much better situation than, let's say, what you're going to get out of Lyft, which we still don't think they'll hit by 2022 or 2023. At the end of the day, it all depends on what your belief of the recovery within the ridesharing business is going to look like.

And our personal view is, you're not going to see the type of numbers you saw at the end of 2019 probably until 2023 at the earliest. So we're not as bullish as many others are out there in terms of that trajectory. But again, listen, we saw the proposition 22 go across earlier this week. And we do think now, at least in terms of Uber, this is now an investable story, where you can kind of bank on a recovery here over the next year. And you probably want to get into the stock now ahead of that recovery.