Reports Q1 results on Wednesday, May 5, after market close
Expected Revenue: $ 3.3 Billion
Expected Earnings Per Share: Loss of $ 0.54
Driving services have become an important indicator of the resurgence of normal life in this pandemic economy. Bookings last year as the virus's rapid spread forced governments to enforce lockdowns, along with massive business and office closures.
That situation put pressure on the shares of Uber Technologies (NYSE :), the world's largest taxi service. The stock plummeted along with the stock of all its competitors.
But as the rollout of vaccines gains momentum in the US and other developed economies, the rides are returning, meaning that cash flows for these companies are also increasing.
Uber reported last month that March gross bookings were the highest in a year. The company's mobility unit, which handles ride services, passed a run rate of $ 30 billion in gross bookings year-on-year that month, while average daily bookings were up 9% from February.
The company's food supply boomed during the global health crisis and helped lessen the blow of those who drive fewer trips. Uber's delivery service, Uber Eats, grew more than 150% in March from a year earlier, surpassing an annual run rate of $ 52 billion as more people ordered takeout.
Demand for rides is recovering faster than Uber's ability to find drivers, the company said, and demand for meal delivery continues to outpace courier availability. Uber plans to spend $ 250 million to get drivers back on the road and recruit new ones as the US coronavirus pandemic abates
Threat of Regulations
Anecdotal evidence suggests that some of the largest US employers are keen to bring employees back to offices. JPMorgan & Chase plans to rotate 50% of its employees through offices by July.
Said CEO Jamie Dimon at The Wall Street Journal CEO Council:
"We want people to go back to work, and I think it will look just like before sometime in September, October."
Despite strong booking trends, a rise in Uber's stock is stagnating as investors shift their money to value stocks and away from fast-growing technology names. Uber shares closed at $ 53 on Tuesday, about 18% below its February high.
A global push to reclassify gig workers as employees, making them eligible for certain benefits, is a threat that makes some investors nervous. US President Joseph Biden last week campaigned for the pledge to provide benefits to handy workers and US Secretary of Labor Marty Walsh intensified the debate last week, telling Reuters in an interview that "many handymen should be classified as workers."
As a result of a recent UK ruling requiring the company to classify its drivers as employees, Uber expects to record significant accrual costs in its first quarter 2021 results in respect of these historical claims and other related costs.
Still, Uber says it is on track to achieve profitability by 2021 with adjusted quarterly earnings before interest, taxes, depreciation and amortization. Wells Fargo Securities upgraded Uber to overweight in a recent note, favoring the company as a long-term game. Its value "remains tied to growth trends that will play out long after the coronavirus-induced disruptions subside," Wells Fargo analysts wrote in a comment.
Bottom Line
Uber's business model proved very resilient during one of the greatest economic shocks of our time. The company is well placed in the post-pandemic environment, where its food delivery business continues to generate strong cash flows, while the rides return at a rapid pace.
