Uber Technologies (NYSE :), the world's largest ride sharing company, has produced an incredible rally since it hit the March lows.
Shares of the San Francisco-based company have increased by approximately 140% since then. After recovering from the dive caused by the coronavirus, they are now up 10% for the year, better than the benchmark still below the year.
At first glance, there is not much to cheer about. Uber & # 39; s ride hailing services came to a halt worldwide as countries closed city after city in an effort to curb the spread of COVID-19, which has so far infected more than four million people worldwide.
The impact of this health crisis was visible in the company released Thursday. One of the statistics: Uber said the number of rides had fallen by about 80% in April.
That unprecedented decline caused a net loss of $ 2.94 billion on revenue of $ 3.54 billion in the three months ended March 31. That compares to a net loss of $ 1.09 billion and a turnover of $ 3.1 billion a year earlier.
The larger decline includes $ 2.1 billion in pre-tax impairments on some of Uber's investments that have lost value as a result of the corona virus crisis. Analysts surveyed by FactSet had expected a net loss of $ 1.38 billion on revenue of $ 3.53 billion for the quarter.
Despite this bleak performance, investors find comfort in CEO Dara Khosrowshahi's plan to tackle this crisis. They also see signs that the worst is likely for the company. , including ending food supply operations in more than half a dozen countries and reducing about one third of the workforce in the Careem unit in the Middle East. The company told Uber employees on Wednesday it fired 14% of its staff and indicated that more cost reductions would be implemented over the next two weeks. The CEO also said he would lose his salary for the rest of the year.
Uber, which has never – and probably will not – adjust quarterly earnings this year – now expects to reach that milestone next year thanks to cost-cutting measures that will eliminate more than $ 1 billion in costs.
As cost restructuring accelerates, Uber's diversification into the food delivery service in profitable locations is thriving as more and more people order online when restaurants are closed. Gross bookings for Uber Eats increased by 52% from the first quarter of last year to $ 4.68 billion in Q1 2020.
"While our ride trade has been hard hit by the persistent pandemic, we have taken swift action to maintain our balance sheet, spend additional resources on Uber Eats and prepare for any recovery scenario," said Khosrowshahi in a statement.
That spike in the food delivery unit is not temporary, according to some analysts, who believe that Eats can give a permanent boost to Uber.
"Thanks to diversification, Uber's sales declines will be less severe than they would otherwise be if the company were pure rides," Piper Sandler analyst Alexander Potter said in a note.
"We expect this trend to continue, and while Uber Eats remains less profitable than rides, we believe the food delivery industry may experience structural, permanent and largely favorable changes as a result of COVID-19."
Bottom Line
Uber is one of those new economy companies that are showing resilience in this recession. Investors bet that Uber & # 39; s timely cost savings and diversification of its business will provide the resilience it needs to develop strong post-coronavirus.
