In early trading on Thursday, Uber shares were up around 4 percent, only hours after a drop after the company’s Q2 results announcement. Uber failed analyst revenue and earnings expectations, owing to driver shortages in its ride-hailing service, while rival Lyft had a strong quarter — but analysts remain optimistic about Uber’s future.
Barclays analyst Ross Sandler kept his Overweight recommendation on the stock, predicting a recovery in volume, take rate, and profitability by November and advising investors to purchase during the drop. Uber’s (NYSE: UBER) price target has been lifted by Barclays to $72 from $63.
JPMorgan analyst Doug Anmuth retained the ride-hailing company’s Overweight rating, upping the price target to $74 from $72. While Uber’s EBITDA loss was more than projected, company management reiterated a fourth-quarter profitability objective, while temporary driver incentive spending has peaked, according to Anmuth.
Second-quarter earnings
Uber’s adjusted second-quarter loss before interest, taxes, depreciation, and amortization was $509 million, up roughly $150 million from the first quarter. This statistic eliminates one-time expenditures like stock-based compensation. According to Refinitiv data, analysts projected the business to record an adjusted EBITDA loss of about $324.5 million.
Gross bookings hit an all-time high of over $22 billion in the second quarter, with more customers returning for rides and food delivery orders up.
Uber announced on Wednesday that from February to July, the number of monthly active drivers and food delivery workers grew by approximately 420,000. According to the firm, passenger wait times in key U.S. cities dropped during that period.
In the second quarter, Uber invested $250 million in driver incentives, resulting in increasing losses in its ride-hailing business. Uber expects mobility profitability to increase considerably as driver investments in the United States and Canada decline, a trend it has seen in Australia and other regions.
Almost the previous year, total costs and expenses increased by over 57 percent to $5.12 billion in the second quarter.
Uber’s second-quarter net profit of $1.1 billion was boosted by unrealized gains in its investments in Chinese ride-hailing giant Didi Global (DIDI.N) and self-driving company Aurora.
According to IBES statistics from Refinitiv, the business recorded second-quarter revenue of $3.9 billion, surpassing average analyst forecasts of $3.75 billion.
Uber’s delivery segment, which includes restaurant delivery service Uber Eats, saw quarterly losses shrink and gross bookings more than quadruple from the previous year.
Word of caution on the earnings call
The firm also cautioned investors that the Delta form of the coronavirus continues to obstruct recovery vision. On a conference call with investors, Uber Chief Executive Dara Khosrowshahi said the company’s food delivery business provides a buffer against potential ride-hail losses, and that July patterns reinforce the company’s optimism for the second half of the year.
Nonetheless, worries about driver supply and the pandemic’s continued impact dominated the results call. Investors are concerned about the industry’s persistent driver shortage as demand rises. Lyft, Uber’s smaller rival, said on Tuesday that it expects the shortage of drivers to persist in the coming quarter, necessitating more expenditures in driver incentives.
Riders returned in larger numbers to Uber’s platform in July, and the company expects this trend to continue in the coming months, along with robust food delivery orders.
What to expect next?
Uber said it will cut losses to $100 million in the third quarter and reiterated its aim of reaching profitability on an adjusted EBITDA basis by the end of the year. That implies the more contagious Delta version does not halt the progressive reopening of the US economy, which Lyft said it was keeping an eye on Tuesday.
As more drivers return to the platform, the firm advised U.S. drivers to take advantage of the incentives before compensation dips to pre-COVID-19 levels. Uber bolstered its pandemic-winning Uber Eats by purchasing competitor firm Postmates and last-mile alcohol delivery service Drizly. Uber has announced collaborations with Albertsons Companies Inc (ACI.N) and Costco Wholesale Corp to develop its grocery delivery service (COST.O).
