Reports Q2 2020 results on Thursday, August 6 after closing
Revenue forecast: $ 2.09 billion
EPS expectation: – $ 0.8
Investors today rely heavily on Uber Technologies (NYSE :). After the ride hailing technology platform took a big hit due to the pandemic slowdown in March, the stock shows strength and the worst is over for the world's largest ride hailing company.
Shares of the San Francisco-based company have risen about 120% since the low of March 18. After recovering from the dive caused by the coronavirus, they are now up 10% for the year, better than the benchmark, which gained 2% in the same period. They closed at $ 32.20 yesterday.
At first glance, there isn't much to cheer about Uber's business during this global health crisis. 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 18 million people worldwide.
But it is the diversified business model that allows Uber to weather this downturn better than other taxi companies.
While the company's ride activity declined sharply in the first quarter, the food delivery unit flourished as more people ordered more online during the pandemic. Gross bookings for Uber Eats increased to $ 4.68 billion in the first quarter of 2020, an increase of 52% compared to the first quarter of the previous year.
Investors will closely monitor the performance of this unit when the company reports it today, especially when the pandemic is still spreading and keeping people in-house. Uber further strengthened its position in this highly competitive market when it announced the acquisition of Postmates, a California-based restaurant delivery service, for $ 2.65 billion in an all-stock transaction.
Postmates complements Uber Eats and has a strong relationship with small and medium restaurants, particularly local favorites that attract customers to the Postmates brand. In addition, Postmates was an early pioneer of 'delivery-as-a-service', which complements Uber's growing efforts in the delivery of groceries, supplies and other goods.
According to a recent Oppenheimer comment, Uber's hybrid rides / food structure has allowed drivers to get new uses during COVID-19 and keep more users engaged, potentially reducing post-pandemic marketing and promotional expenses .
Uber & # 39; s rapid austerity to tackle the pandemic decline of its ride-sharing service is another factor that keeps investors calm during this crisis. Uber has announced a series of cost-cutting measures, including the cessation of food delivery operations in more than half a dozen countries and the reduction of approximately one third of the workforce in the Middle East car rental service known as Careem. In May, Uber announced it would lay off 14% of its workforce.
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.
Bottom Line
Uber is one of those new economy companies that are showing resilience in this recession. The company makes meaningful gains in its Eats division and shows cost discipline during the crisis.
The current earnings report is likely to provide further evidence that the company is on the right track.
