If you thought that ride-hailing service Uber ( NYSE UBER) would help the stock market recover from its shaky start to the years of success it has had, you think twice. Such as Apple ( NASDAQ (NASDAQ: Apple (NASDAQ: AAPL) and Microsoft ( NASDAQ: MSFT), who both reported substantial numbers this week, weren’t able to stop the flow of sales, and the company that’s at the forefront of technology for travel doesn’t plan to either. For now, at least. Uber risks becoming the next victim of 2022, which saw the growth of tech stocks and their most disappointing starting to a year since the last decade. The tumult of rising inflation, a slowing of development, and the rising interest rate are conspiring to create a risk-off atmosphere, causing even the most ardent investors to reconsider their long-term investments.
The San Francisco headquartered company reported its Q1 earnings before the bell rang yesterday, and they’d be one of the most watched events of this week. The quarter’s earnings per share were -$3.04, an astronomical loss much lower than the anticipated -$0.11. This was why numerous media outlets were confused and stated that the numbers weren’t comparable.
In terms of revenue, the company saw a staggering rise of 138% year-on-last year. This was well over the expectations. Gross bookings also soared by 35% compared to the same quarter in 2013 and were at the top end of the previously forecasted range. The company’s leadership was initially optimistic, with the CEO, Dara Khosrowshahi, declaring that he thought the performance showed how much advancement “we’ve made navigating out of the pandemic and how the power of our platform is differentiating our business performance. In April, Mobility Gross Bookings exceeded 2019 levels across all regions and use cases. There’s never been a more exciting time to innovate at Uber and we’re focused on executing our strategy to grow our platform profitably.”
The CFO, Nelson Chai, echoed this sentiment in his statement, “we ,are very pleased with our results for the first quarter as we see the performance above our guidance for the quarter and our strong margins for incremental improvement. With the free cash flow advancing towards zero in Q1, we expect to see significant positive free cash flow for the full-year 2022.”
But, despite what might be a good performance at the expense of revenue, Uber’s leadership emphasized the present headwinds and the potential risks. Khosrowshahi stressed that the dangers of global regulation remain an issue for Uber and that the margins for expanding taxi cabs were less than other sectors.
Uber’s shares were stressed before the announcement, and the information and statements were enough to see them fall in the morning. They plunged as high as 12% since the close on Tuesday but then rebounded slightly until yesterday’s close. However, they were still at their lowest levels since April 2020, and many wondered if they would ever feel at ease with Uber again. The company’s stock is down by over 50% from the record-setting high. There are no indications that the recovery will start any time shortly. The company is also competing with fierce competitors by Lyft ( NASDAQ: LYFT), which is struggling with some issues. When their figures for the quarter were released early this early in the morning, Lyft shares fell more than 35%..
It’s a difficult time to be a tech-focused investor. That’s why it’s vital to be more careful than before to be selective about the companies you hold. When you look at Uber’s chart, there isn’t much to love now. The shares are in a strong downtrend since lower levels later followed last year and lower highs. This is the standard definition of a stock that isn’t appealing to investors.
It’s unclear what’s required to make things better. However, now isn’t an ideal time to run a non-profit company that’s been selling its long-term plan to investors. Interest rates are increasing more frequently than ever, which means that non-profitable businesses such as Uber will have to pay higher and higher to finance their needs. Beware of the buyer.