& # 39; The world's largest driving company, Uber Technologies Inc (NYSE :), is now under siege. The problems are widespread, serious in nature and have no quick solutions.
This week, the London transit authorities deprived the company of its license to operate on passenger safety issues, creating the possibility that the company could be robbed of its largest European market if Uber's appeal against the decision was taken by the courts. turned down.
The regulator found unlicensed users posing as Uber drivers and forging their identities in at least 14,000 journeys. Before the new setback, the company struggled in other major jurisdictions to convince authorities that it is doing its business well and treating its drivers fairly.
A new law in California gives workers in the DIY economy the right to a minimum wage. A similar battle will soon take place in New York, where lawmakers are planning to adopt legislation for cigarette workers next year, according to a report in Bloomberg.
Tax authorities also catch up on start-up startups. In November, New Jersey stated that Uber owes $ 650 million in unemployment and disability insurance policies because the row-stock company misidentifies drivers as independent contractors.
Uber investors are the biggest losers in the midst of this rigorous investigation of global companies. The company's shares have lost more than 30% of the value of the IPO price of $ 45 per share and are now at $ 29.59. And because these problems arise and the cash position remains weak, there is no prospect of the future or when the company will reach the road to profitability.
In its third quarterly report published this month, Uber again disappointed investors with weaker booking numbers and monthly active users, two of the statistics closest viewed by Wall Street. The company expects to lose between $ 2.8 billion and $ 2.9 billion this year.
Uber & # 39; s evolving platform
Losses from technology companies that are in a growth phase are not surprising. But what raises doubts about the San Francisco-based company is the absence of a clearly formulated strategy that could turn this unicorn into a profitable enterprise and overcome the legal challenges.
The London license threat arose just as some analysts started a bottom in Uber's share price after a deep correction. But that call becomes very risky to make if the company doesn't become a winner in a legal battle that can drag on for years.
Despite these setbacks, Uber's Chief Executive Officer Dara Khosrowshahi wants investors to focus on the power of the company's evolving platform, which he says will one day create the largest modern transportation ecosystem, including the fast-growing one service, the fast-growing food-delivery business – Uber Eats – electric scooters, cargo delivery, driverless vehicles and even flying cars.
A final addition to its growing service portfolio is Cornershop, which helps supermarkets, pharmacies and food retailers deliver their goods.
That all looks great and perhaps achievable for a technology-driven company that has changed the way people move from one place to another.
The 10-year-old company has more than 65% of the market for journeys in the US, Canada, Latin America, Europe, Australia and New Zealand.
But that share is becoming increasingly difficult to defend when many smaller companies dedicated to driving face new challenges and increase competition globally.
For those investors who want to take some exposure in the ride industry, we find Uber's biggest rival, Lyft Inc (NASDAQ :), a much better bet. In contrast to Uber, Lyft is exclusively focused on transport and comes closer to achieving profitability.
The company beat analyst estimates for the third quarter last month and increased its forecast for 2019 and reiterated that it will make a profit by the end of 2021.
Bottom Line
There is little hope that the Uber share will recover from its deep malaise in 2020, given the growing control of its operations and many regulatory barriers that the company must endure before investor confidence is restored. In this uncertain environment, this is not the right time to bet on Uber shares.
