'Herculean-like challenges looking ahead': Here's what 4 analysts are saying ahead of Uber's first-quarter earnings report (UBER)
Fortune
- Uber will report first quarter 2020 earnings on Thursday after market close.
- The company withdrew the 2020 guidance it gave during its fourth quarter 2019 earnings report due to the impact of the coronavirus pandemic.
- Here's what four analysts are saying about Uber before its Thursday report.
- Watch Uber trade live on Markets Insider.
- Read more on Business Insider.
Uber will report its first quarter earnings on Thursday after market close, following rival Lyft's results on Wednesday.
The report will give investors a glimpse at how the ride-sharing company fared amid the earliest weeks of the coronavirus pandemic, when states started shutting down major parts of their economies and consumers were told to practice social distancing.
On Wednesday, Uber announced in a regulatory filing that it will cut 3,700 jobs — 14% of its total workforce — to save money during the pandemic. Shares dipped as much as 4% during Wednesday's trading session.
The step is a "painful, but unfortunately a necessary move for Dara & Co. to make in this unprecedented COVID-19 environment," wrote Wedbush analysts led by Daniel Ives in a Wednesday note.
Here's what analysts surveyed by Bloomberg expect:
- Adjusted loss per share: -75 cents per share
- Revenue: $3.02 billion
Ives continued: "On the other side of this dark valley, the Uber business model will likely look a lot different for the next few years (at least) and the company must rationalize costs and a smaller operation to focus on attaining profitability in this 'new normal' backdrop."
Uber also reports results following its main rival in the sector, Lyft. Shares of Lyft surged as much as 19% in after-hours trading Wednesday when the company reported that its rider numbers in the first quarter of 2020 grew on the year despite the early impact of the coronavirus pandemic. Lyft also reported better-than-expected revenue in the quarter.
Uber shares were lifted by the results, gaining as much as 9% after market close Wednesday.
At the end of 2019, Uber said that it planned to turn a profit by the end of 2020, sooner than it had previously expected. But in April, the company withdrew the guidance it made in its fourth quarter earnings call because of the uncertainty caused by COVID-19.
The company also warned that it expects an impairment charge from declines in investments due to the global impact of the outbreak. Now, investors will likely be looking for an updated timeline on profitability, or a new guidance from Uber as the company navigates through the coronavirus crisis.
Uber has been in the spotlight amid the coronavirus pandemic as both riders and drivers worry about how to travel safely. While it's expected that rides will suffer in the quarter as consumers stay home, Uber Eats may benefit from an uptick in ordering in.
Uber stock has declined about 7% this year through Wednesday's close.
Here's what four analysts are saying about the ride-sharing company ahead of its earnings release:
1. Canaccord Genuity: "COVID-19 had significantly impacted the rides business"
Price target: $48
Rating: Buy
"Uber has provided several updates on the impact of COVID-19 on its business since the pandemic began," wrote Maria Ripps of Canaccord Genuity in a May 3 note. "In mid-March, the company confirmed that COVID-19 had significantly impacted the rides business, that markets impacted early on have also recovered quickly, and that Eats was performing solidly in the current environment."
"Uber also provided a liquidity update, reminding investors of the strength of its balance sheet and the highly variable nature of its cost structure."
"Investors will likely be looking for an update around the business recovery and updated thoughts on the timeline to reach EBITDA profitability given the impact from the coronavirus."
2. Bank of America: "The crisis will ultimately strengthen its competitive position"
Price target: $40
Rating: Buy
"Uber has communicated near-term bookings pressure and higher industry losses, and we think the crisis will ultimately strengthen its competitive position, given its stronger balance sheet & market share leadership," wrote Justin Post of Bank of America in a Tuesday note.
"Uber has made significant adjustments recently to adapt to COVID-19. Uber has suspended its Pool service in the US and Canada, as well as London and Paris," Post said. The company has also implemented contactless delivery, and started giving drivers that test positive two weeks of compensation.
"New rounds of cost cutting also appears to be in focus and could be outlined on the 1Q call," Post wrote. "We continue to view Uber as well positioned given low penetration of Online transportation services and strong global market share."
3. Wedbush: "Herculean-like challenges looking ahead"
Price target: $30
Rating: Buy
"Uber and Lyft face Herculean-like challenges looking ahead as the new reality will likely change the business models of these companies (and competitors) for the foreseeable future," wrote Daniel Ives in a Tuesday note.
"Even in food delivery while consumer demand is there, competition is driving meaningful pressure on profitability. With drivers and customers likely required to wear masks during rides and concerns around previous occupants of vehicles, there is a segment of the population that will no longer use these vehicles."
"As Uber is exposed to earlier-hit markets in Europe and Asia, we expect demand for the company to have been more greatly impacted than Lyft in 1Q20E, with a 38% Y/Y decline in MAPCs vs. a 30% decline in riders for Lyft."
"In our view, Uber is more exposed to a prolonged overhang in areas like international and business travel, but we ultimately believe that both companies are likely to face a similar (and peak) level of operational headwinds in 2Q20E, where we project a Y/Y Ridesharing revenue contraction of -69% for Uber and -66% for Lyft."
See the rest of the story at Business Insider
See Also: