& # 39; The world's largest ride tuning service, Uber Technologies Inc. (NYSE :), a precarious slack has been set since the gloomy stock market introduction last month. It must quickly prove that it is worth more than what its shares are trading on. But that task is not easy if growth slows down, sales fall and losses increase.
That is the message that investors received from the first since the IPO, which was released on May 30 and made it clear that the road to profitability will be long and hard for Uber. Although the results were largely in line with analysts' expectations, they demonstrated that the company does not have much room to maneuver in the murderous, competitive environment in which it operates.
The shares reflect that downbeat assessment: they have fallen by nearly 3% since the much-praised IPO on May 10, after falling more than 10% during their very first trading session. While they won 1.5% on Friday, and to close $ 40.41, they fell by -0.5% last weekend during the hour trading.
Slowing growth
Uber & # 39; s Q1 results showed that sales of its core rides and food deliveries grew 10% year-on-year to $ 2.62 billion, much slower than the same period an years ago, which demonstrates a consistent downward trend. Net sales growth on its core platform decreased from 125% in 2017 to 39% in 2018. The contribution margin on the core platform, which represents sales plus minus variable costs, was 18% a year ago, but fell to a negative 4.5% in the first quarter.
Growth in gross bookings, an important measure of what customers spend with Uber, is also slowing. They amounted to $ 14.7 billion in the quarter, an increase of 34% compared to 37% in the fourth quarter. Monthly active platform users have been expanded to 93 million, an increase of only 2%. That is less than a consecutive growth of 3% in the first quarter of last year and an average of 14% compared to the previous 11 quarters.
These weaker figures and the escalating costs of the company caused a quarterly loss of $ 1.01 billion, which was among the largest of all public companies. A loss in an explosive growth phase is not unusual, but it is difficult to give that benefit of the doubt to Uber when growth is already slowing and management does not seem to have a solid answer to satisfy its observant investors.
In comments about last week's income, Uber tried to breathe life into the stock price that had fallen by saying that Uber plans to reduce costs by reducing the amount of money it spends on customer promotions and marketing, according to Uber & # 39; s Chief Financial Agent Nelson Chai. But that cost-saving intention is inconsistent with his statement in the press release on income:
"Our investments remain focused on global platform expansion and long-term product differentiation, but we will not hesitate to invest to defend our market position globally."
To be sure, Uber & # 39; s leadership in driving cars is indisputable. It offers more services than its competitors, including the delivery of food and logistics, with a much wider reach worldwide. It is active in 700 metropolitan areas on six continents. Yet, it is not the right time to invest in stocks when growth slows and the stocks clearly have more room to fall.
Bottom Line
Uber's stock is still an unavoidable name. Slowing growth indicates that there is a long way to go for Uber investors before they see a sustainable improvement in its activities. With a rapidly deteriorating macro environment for growth stocks and the toll of competition, we don't think it's a good time to go on Uber for a long time.
