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Chicago, IL – August 8, 2024 – Zacks.com announces the list of stocks and featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Uber Technologies (UBER - Free Report) , Lyft (LYFT - Free Report) and DoorDash (DASH - Free Report) .
Here are highlights from Thursday’s Analyst Blog:
How Should You Play UBER Stock Following Q2 Earnings Beat?
Uber Technologies reported strong second-quarter 2024 results on Aug 6, before the opening bell. The leading ride-hailing company not only reported better-than-expected earnings per share and revenues but returned to profitability after posting a loss in first-quarter 2024. Adding to the optimism, second-quarter 2024 revenues increased 16%, year over year, which marked the fastest pace in five quarters. The strong earnings report naturally pleased investors, with the stock of this San Francisco-based company gaining 10.9%, ending the trading session at $64.87. Shares of rival Lyft increased 3.8% on Aug 6.
Upbeat Gross Bookings Aid UBER’s Q2 Earnings
With economic activities returning to normal levels in the post-pandemic scenario, people are traveling to work and other places as before. As a result, UBER’s Mobility business has been seeing buoyant demand, with segmental revenues increasing 25% in the June quarter.
With customer traffic picking up, gross bookings from the unit were highly impressive, in turn aiding second-quarter results. Gross bookings from the Mobility segment in the June quarter increased 23% on a year-over-year basis to $20.6 billion. The actual figure exceeded our expectation of $20.5 billion.
Uber’s Delivery business also performed well in the quarter, with segmental revenues growing 8% year over year. Gross bookings from the Delivery segment in the June quarter grew 16% on a year-over-year basis to $18.13 billion, in line with our estimate.
Total gross bookings in the quarter increased 19% year over year to $40 billion, with trips soaring 21% to 2.8 billion, or approximately 30 million trips per day on average. Expressing delight at the strong demand scenario, UBER’s CEO Dara Khosrowshahi stated. "The Uber consumer has never been stronger. More people are using the platform, and more frequently, than ever before."
Gross bookings are likely to remain strong in the third quarter of 2024 as well. The metric is anticipated to be in the $40.25-$41.75 billion range, representing growth on a constant currency basis in the 18-23% band from third-quarter 2023 actuals.
What’s Next for Investors?
For long-term investors, a single quarter’s results are not so important. They would rather base their investment decision on the underlying fundamentals. To aid investors’ decision-making regarding UBER, let’s delve into the relevant factors.
UBER is being aided by a strong operating model. Diversification is imperative for big companies to reduce risks, and UBER excels in this area. It has engaged in numerous strategic acquisitions, geographic and product diversifications and innovations. Even though Uber’s primary business is ride-sharing, it has diversified into food delivery and freight over time.
Uber’s endeavors to expand into the international markets are commendable and provide it with the benefits of geographical diversification. Prudent investments enable it to extend services and solidify its comprehensive offerings. Its focus on disciplined spending and cost-cutting measures also bodes well as far as bottom-line growth is concerned. The company’s long-term (3-5 years) earnings growth rate is an impressive 52.9%, higher than its industry’s 25.1%.
From a valuation perspective, the company’s shares currently trade at levels lower than its five-year median, going by the forward 12-month price/sales ratio.
Despite the abovementioned tailwinds, there are certain factors that one needs to be mindful of before making an investment decision on UBER.
The performance of the Freight unit due to the slowdown in freight demand is concerning. Freight revenues declined in each of the first two quarters of 2024 due to lower revenue per load as a result of the freight market downturn. Additionally, Uber has been grappling with labor unrest for some time.
Despite the company’s efforts to improve operational efficiency and strategic growth initiatives, we are concerned about its high debt levels. Long-term debt increased 66.6% to $9.5 billion at second-quarter 2024-end from 2019 levels. Notably, UBER went public in 2019.
Despite the uptick following the second-quarter results, UBER shares have underperformed its industry as well as fellow industry player DoorDash over the past six months.
Final Thoughts
We can safely conclude that despite the impressive second-quarter results, investors should refrain from rushing to buy UBER now as it is facing quite a few challenges. Instead, they should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested for solid long-term prospects. The stock’s Zacks Rank #3 (Hold) supports our thesis.
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Uber, Lyft and DoorDash
For Immediate Releases
Chicago, IL – August 8, 2024 – Zacks.com announces the list of stocks and featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Uber Technologies (UBER - Free Report) , Lyft (LYFT - Free Report) and DoorDash (DASH - Free Report) .
Here are highlights from Thursday’s Analyst Blog:
How Should You Play UBER Stock Following Q2 Earnings Beat?
Uber Technologies reported strong second-quarter 2024 results on Aug 6, before the opening bell. The leading ride-hailing company not only reported better-than-expected earnings per share and revenues but returned to profitability after posting a loss in first-quarter 2024. Adding to the optimism, second-quarter 2024 revenues increased 16%, year over year, which marked the fastest pace in five quarters. The strong earnings report naturally pleased investors, with the stock of this San Francisco-based company gaining 10.9%, ending the trading session at $64.87. Shares of rival Lyft increased 3.8% on Aug 6.
Upbeat Gross Bookings Aid UBER’s Q2 Earnings
With economic activities returning to normal levels in the post-pandemic scenario, people are traveling to work and other places as before. As a result, UBER’s Mobility business has been seeing buoyant demand, with segmental revenues increasing 25% in the June quarter.
With customer traffic picking up, gross bookings from the unit were highly impressive, in turn aiding second-quarter results. Gross bookings from the Mobility segment in the June quarter increased 23% on a year-over-year basis to $20.6 billion. The actual figure exceeded our expectation of $20.5 billion.
Uber’s Delivery business also performed well in the quarter, with segmental revenues growing 8% year over year. Gross bookings from the Delivery segment in the June quarter grew 16% on a year-over-year basis to $18.13 billion, in line with our estimate.
Total gross bookings in the quarter increased 19% year over year to $40 billion, with trips soaring 21% to 2.8 billion, or approximately 30 million trips per day on average. Expressing delight at the strong demand scenario, UBER’s CEO Dara Khosrowshahi stated. "The Uber consumer has never been stronger. More people are using the platform, and more frequently, than ever before."
Gross bookings are likely to remain strong in the third quarter of 2024 as well. The metric is anticipated to be in the $40.25-$41.75 billion range, representing growth on a constant currency basis in the 18-23% band from third-quarter 2023 actuals.
What’s Next for Investors?
For long-term investors, a single quarter’s results are not so important. They would rather base their investment decision on the underlying fundamentals. To aid investors’ decision-making regarding UBER, let’s delve into the relevant factors.
UBER is being aided by a strong operating model. Diversification is imperative for big companies to reduce risks, and UBER excels in this area. It has engaged in numerous strategic acquisitions, geographic and product diversifications and innovations. Even though Uber’s primary business is ride-sharing, it has diversified into food delivery and freight over time.
Uber’s endeavors to expand into the international markets are commendable and provide it with the benefits of geographical diversification. Prudent investments enable it to extend services and solidify its comprehensive offerings. Its focus on disciplined spending and cost-cutting measures also bodes well as far as bottom-line growth is concerned. The company’s long-term (3-5 years) earnings growth rate is an impressive 52.9%, higher than its industry’s 25.1%.
From a valuation perspective, the company’s shares currently trade at levels lower than its five-year median, going by the forward 12-month price/sales ratio.
Despite the abovementioned tailwinds, there are certain factors that one needs to be mindful of before making an investment decision on UBER.
The performance of the Freight unit due to the slowdown in freight demand is concerning. Freight revenues declined in each of the first two quarters of 2024 due to lower revenue per load as a result of the freight market downturn. Additionally, Uber has been grappling with labor unrest for some time.
Despite the company’s efforts to improve operational efficiency and strategic growth initiatives, we are concerned about its high debt levels. Long-term debt increased 66.6% to $9.5 billion at second-quarter 2024-end from 2019 levels. Notably, UBER went public in 2019.
Despite the uptick following the second-quarter results, UBER shares have underperformed its industry as well as fellow industry player DoorDash over the past six months.
Final Thoughts
We can safely conclude that despite the impressive second-quarter results, investors should refrain from rushing to buy UBER now as it is facing quite a few challenges. Instead, they should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested for solid long-term prospects. The stock’s Zacks Rank #3 (Hold) supports our thesis.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.