Business World

Wednesday 18 September 2019

Uber loses $5bn, misses Wall Street targets despite easing price war

Photo: Reuters
Photo: Reuters

Alexandria Sage and Vibhuti Sharma

Uber reported a record $5.2bn (€4.6bn) loss and revenue that fell short of Wall Street targets on Thursday as growth in its core ride-hailing business slowed, sending its shares down 6pc.

The company said a price war in the United States was easing and that an important measure of profitability topped its target, but slowing revenue growth raised questions about Uber's ability to expand and fend off competition.

"Losses are widening and the competition is cut-throat," said Haris Anwar, analyst at financial markets platform Investing.com. "What's sapping investor confidence and hitting its stock hard after this report is the absence of a clear path to grow revenue and cut costs."

Uber's second-quarter net loss, widening from a loss of $878m a year earlier, included $3.9bn of stock-based compensation expenses related to its IPO earlier this year and nearly $300m in "driver appreciation" related to the stock sale.

The report caught investors off guard in part because Uber's smaller rival Lyft on Wednesday had raised revenue expectations and described an easing price war.

Uber stock had risen more than 8pc and Lyft had gained 3pc during the day. Following Uber's report, its shares fell 6pc and Lyft dropped nearly 2pc.

Uber reported that revenue growth slowed to 14pc to $3.2bn and fell short of the average analyst estimate of $3.36bn, according to IBES data from Refinitiv.

The company's core business, ride-hailing, grew revenue only 2pc to $2.3bn. Food delivery Uber Eats grew 72pc to $595m.

Gross bookings, a measure of total value of car rides, scooter and bicycle trips, food deliveries and other services before payments to drivers, restaurants and other expenses, rose 31pc from a year earlier to $15.76bn. Analysts on average were expecting $15.8bn.

At the same time, Uber is keeping less money per car ride. The amount passengers spent on trips rose 20pc while the amount Uber kept after paying its drivers increased just 4pc.

CEO Dara Khosrowshahi said in a press call the competitive environment was starting to rationalize and had been "progressively improving" since the first quarter.

This year would be the peak for investment and losses would lessen in 2020 and 2021, he said.

Lyft on Wednesday said pricing had become "more rational", meaning the company should spend less on promotions and incentives to win market share. It raised its revenue outlook.

Both the companies have historically relied on subsidization to attract riders and have been spending heavily to expand services into areas such as self-driving technology for Lyft and food delivery for Uber.

Uber's costs rose 147pc to $8.65bn in the quarter, including a sharp rise in spending for research and development.

"While we will continue to invest aggressively in growth, we also want it to be healthy growth, and this quarter we made good progress in that direction," chief financial officer Nelson Chai said in a statement.

The adjusted loss before items including interest, tax, and stock-based compensation more than doubled to $656m but was better than the company expected, Uber said. It also topped Wall Street targets of a $996m loss.

Gross bookings for the year would be $65bn to $67bn, it said, in line with Wall Street's target of $65.9bn.

The company, which has not yet made clear whether it will make a profit, is trying to convince investors that growth will come not only from its ride services, but also from other logistics and food delivery services.

Uber said its monthly active users rose to 99 million globally, from 93 million at the end of the first quarter and 76 million a year earlier.

Reuters

Also in Business