It’s an old joke: Call me a taxi. OK, you’re a taxi. (rimshot) But what’s not a taxi? Uber Technologies (NYSE:UBER). Today’s Uber is a different beast from the ride-hailing firm that first offered stock on the New York Stock Exchange at $42 a share in May 2019.
More than two years later, Uber stock closed July 27 at $45.82 a share. That’s a market cap of about $86 billion. It is doing all sorts of delivery — restaurants, groceries, even freight.
What hasn’t changed is its lack of profit. Uber expects to report a loss of 54 cents a share on Aug 4, on $3.73 billion of revenue. During the March quarter it lost 6 cents a share on revenue of $2.9 billion.
Acquisitions Stoke Growth
It’s hard to make earnings comparisons because Uber has been seeking so much growth from acquisitions.
Its latest buy is Transact, a freight logistics company, which it’s buying from private equity for $2.25 billion. That includes $1.5 billion of debt, based on its March report, which would bring the total over $9 billion, against $5.6 billion in cash and short-term investments.
This goes on top of it’s buying the rest of Cornershop, a grocery delivery service mainly serving Latin America. That cost 29 million new shares of stock, worth about $1.35 billion at today’s prices. In 2020 Uber paid $2.65 billion for Postmates, a restaurant delivery service competing with Uber Eats. It also paid $1.1 billion for Drizzly, an alcohol delivery startup.
This has made Uber the biggest competitor to DoorDash (NYSE:DASH), which came public late last year and now has a market cap of $58.6 billion. Uber talks about “synergies” from its acquisitions but it keeps falling behind DoorDash, which prefers to grow organically.
Savior CEO Faces Tough Fights
Today’s Uber is the creation of Dara Khosrowshahi, the former CEO of Expedia (NASDAQ:EXPE). He has been running Uber for about four years now, brought in to save the then-pre IPO firm from the travails of founder Travis Kalanick. That’s enough time to get admiring portraits of himself done by political reporter Maureen Dowd. But Khosrowshahi has as many political problems as his predecessor did.
Along with competitor Lyft (NASDAQ:LYFT), Uber just took a one-day strike of drivers upset over pay and working conditions. Uber won its expensive fight for California’s Proposition 22, classifying its drivers as contractors, last year.
But while Uber can dictate working conditions, that doesn’t mean it can get help. Two-hour wait times and $100 fares from major airports are becoming common. Drivers are getting a little over half that money. Uber is sharing more of its data with them, but that’s all. It’s certainly doing little to keep them safe.
Instead, Uber is getting more heavily into delivering goods. In addition to its many acquisitions it has lined up a grocery delivery pilot with Costco Wholesale (NASDAQ:COST). It’s also focusing more on its global footprint. Even that was hurt by the post-IPO collapse of DiDi Global (NASDAQ:DIDI), the so-called “Chinese Uber,” which cost it $2 billion.
The Bottom Line on UBER stock
Uber has always claimed to have a bright future offsetting a troubled present, using technology to arbitrage around labor costs.
That’s still the story with UBER stock.
It will take more than New York Times columnist Dowd’s appreciation, however, to turn Uber’s numbers around. The 20 analysts covering expect it to have revenues of $22.2 billion this year. That means you’re paying four times revenue for a string of losses.
Whether Uber can do better moving goods instead of people still depends on it getting people to do the work. The hardball tactics it used when labor was abundant are backfiring now that labor is dear.
Uber bulls expect the company to become profitable in 2023, based on revenue growth of 68% per year. I don’t buy it unless the supply-demand curve for labor changes drastically.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future, now available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.