Uber’s [UBER] share price reached a post-pandemic peak of $38.52 on 16 September before easing off the gas a little since to close at $35.77 on 3 November — up 15.42% so far in 2020. While the stock has experienced frequent turbulence over recent months, the overall trend has been positive this year. Will Uber’s share price continue to benefit when the company reports its third-quarter earnings on 5 November?
Uber’s share price had a promising start to 2020. Opening the year on $29.94, Uber’s share price climbed 39.8% to a year-high of $41.86 by 12 February. The March crash that accompanied the coronavirus pandemic saw Uber’s share price fall to $13.71, the stock’s all-time-low since floating in May 2019.
As markets, and global economies, recovered from the shock, Uber’s share price staged a partial recovery, reaching $38.78 on 5 June and, despite falling below $35 for the duration of July and August, Uber’s share price appears to have gained in September and October.
However, Uber has underperformed the technology sector as a whole for much of 2020. This was most pronounced during October, as Zacks noted, when Uber fell 8.4% against the computer and technology sector’s 5.8% gain.
Falling foul of the law
Besides the devastating impact of the coronavirus pandemic on the ride-hailing industry, Uber’s share price — as well as that of rivals, including Lyft [LYFT] — has faced a series of existential challenges to its business model that have played out in the world’s courtrooms.
Last week, reports emerged that a California appeals court has ruled Uber can no longer classify its drivers as independent contractors in the state, and will need to offer them the same benefits as those enjoyed by full-time employees. Worryingly for Uber, there are murmurings that this could be rolled out at a federal level.
There has been some good news for Uber’s lawyers recently, however, as the service has been awarded a renewed contract to continue operating in London. Uber has recently sought to consolidate its position in the UK capital, its largest European market, by attempting to purchase Daimler and BMW’s rival service Free Now for $1.2bn.
While Uber’s core taxi business has been hit hard by the coronavirus pandemic, which has seen monthly active users fall from nearly 100 million to 55 million in the first half of the year, the company has benefitted from an inverse boost to its food delivery business.
In last quarter’s results, Uber announced a doubling of Uber Eats revenue to $1.2bn. However, Uber Eats still made a loss of $232m last quarter. Nelson Chai, Uber’s CFO, expects a similar performance from Uber’s food delivery arm in the third quarter.
Uber Eats Q2 revenue
All told, the upshot is Uber’s early-year hopes of posting its first-ever profitable quarter have not improved. Zacks forecast sales of $3.14bn for the quarter, a 42.7% increase on the $2.2bn it posted in Q2, but still 17.58% below the equivalent figure from Q3 2019.
Uber’s earnings will be in the region of -$0.59 per share, again a significant improvement on the -$1.02 reported last quarter. If accurate, this figure would indicate improving year-on-year profitability for Uber, a 13.2% increase on the EPS of -$0.68 from the same quarter last year.
Analysts willing to take a ride
Taken alongside one another, the sales and earnings forecasts indicate that Uber has been successful in reducing its costs over the previous 12 months, thanks in no small part to dramatic cost-cutting measures taken during the first half of the year.
Among 36 analysts polled on CNN Money, the median 12-month price forecast for Uber’s share price is $41.50, which represents a 16% uptick on the stock as of close on 3 November.
A high estimate of $58 indicates that some analysts feel Uber’s share price could accelerate well beyond its previous all-time high, though a low estimate of $14 shows fears remain that Uber’s performance could still regress to the pandemic-induced levels it endured in March.
Meanwhile, the consensus among the 41 polled on CNN Money is to Buy the stock, a rating given by 30 analysts, while four consider it an Outperform, four a Hold and three a Sell.
|Operating Margin (TTM)||-34.79%|
|Quarterly Revenue Growth (YoY)||-29.2%|
Uber share price vitals, Yahoo Finance, 4 November 2020