Rideshare company Uber’s stock plummeted 12% Thursday after the company delivered disappointing second-quarter results, before recovering some and settling around 4%. Uber stock prices fell 11 percent, to $38.07, in after-hours trading, raking through the company’s initial stock price of $45. The stock had recovered slightly after the earnings call, down 6.75% to $40 as of 11:30am ET Friday.
Mainly due to stock-based compensation, the company suffered sizable net losses of more than $5 billion. Aside from stock-based compensation, Uber’s losses were around $1.3 billion, which was approximately 30% worse than in the preceding quarter.
However, this is not Uber’s first poor report, but is simply the latest in a protacted series of bad quarters for the ride-hailing company, which also lost over a billion dollars during the first three months of this year, carrying 2019’s losses to over $6.2 billion. Uber said it also faced rising competition in global markets and slowing growth on its core ride-hailing platform, where revenue increased by 2 percent.
Uber has built its business based on its self-employed drivers, but one wonders if this a business model that is sustainable. The company can blame both competition and advancing technology for that, especially with the advent of self-driving vehicles.
Still, according to CEO Dara Khosrowshahi, Uber is optimizing its service with a client-centered strategy, which is working to improve the function of matching riders to drivers and each other, as well as increasing the number of seats filled in each ride, which would ultimately ameliorate profitability. And Uber aims to create improved partnerships with local transit agencies in its attempt to interest more passengers in taking shared trips rather than driving alone.
“We’re focused on improving profitability in this market and many other markets around the world and based on what we read Lyft seems to be focused in a similar way,” Khosrowshahi said on the company’s earnings call.
Key competitor Lyft, in contrast, reported better-than-anticipated revenue growth and other positive metrics on Wednesday, despite a $644 million loss for the quarter, which gave Lyft and Uber stocks a boost in regular trading Thursday, prior to Uber’s earnings release.
Investors looking to participate in ETFs that offer access to the transportation and ridesharing industry might consider the Renaissance IPO ETF (IPO), which holds Uber and Lyft, the ClearBridge Large Cap Growth ESG ETF (LRGE), or the WisdomTree Modern Tech Platforms Fund (PLAT).
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