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Fundamental Analysis: UBER TECHNOLOGIES (#UBER)

Uber Technologies, Inc., commonly known as Uber, is an American technology company. Its services include ride-hailing, food delivery, package delivery, couriers, freight transportation, and, through a partnership with Lime, electric bicycle and motorized scooter renta

Additional costs related to driver shortages and new worker classification laws that have questioned profitability this year have driven Uber, and competitors like Lyft downward.

However, this can only be temporary difficulties for companies.

Despite difficulties faced by Uber and Lyft, we believe that they are temporary and will grow in the long term: pullbacks are now creating attractive entry points.

⚡️Growth factors:

  • According to the results of financial statements for the first quarter of 2021, the total number of bookings amounted to $ 19.54 billion against forecasts of $ 18.07 billion. Orders for delivery $ 12.46 billion against expectations of $ 11.09 billion. Mobile orders - $ 6.77 billion, an estimated $ 6.74 billion. Revenue decreased by 11% yoy / y to $ 2.9 bln.

  • The net loss was $ 108 million, but this is 96% less than the loss for the same period last year. The net loss decreased in large part due to the gain of $ 1.6 billion from the sale of ATG, in part this amount was reduced due to the accrual of $ 600 million, which was paid to settle claims in the UK related to the classification of drivers.

  • The company is able to become profitable in the second half of 2021 due to record gross orders and cost reductions, rich product offerings, brand strength, as well as due to revaluation of shares in several companies that are at the stage of preliminary public offering.

  • Evercore ISI analysts believe Uber will break even on Q4 EBITDA and achieve “stable profitability thereafter” as ride-sharing prices are inelastic. What's more, the Uber Ride Share app is becoming a significant source of new customers for Uber Eats.

📖 Financial indicators:

  • Earnings vs Savings Rate: UBER is forecast to become profitable over the next 3 years, which is considered faster growth than the savings rate (2%, what you would receive on a low risk government bond)

  • Revenue vs Market: UBER's revenue (23.9% per year) is forecast to grow faster than the US market (9% per year)

  • Quality Earnings: UBER is currently unprofitable

  • Earnings Trend: UBER is unprofitable, and losses have increased over the past 5 years at a rate of 19.5% per year.

  • Short Term Liabilities: UBER's short term assets ($8.3B) exceed its short term liabilities ($7.3B)

  • Long Term Liabilities: UBER's short term assets ($8.3B) do not cover its long term liabilities ($13.3B)

  • Debt Level: UBER's debt to equity ratio (55.6%) is considered high

  • Below Fair Value: UBER ($47.42) is trading below our estimate of fair value ($74.12)

🎯 Target price - $ 72, upside potential + 56%

OTB Global Investments

18 May 2021

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