On May 10th 2019 Uber went public and was one of the most hyped stocks in a long time. They opened that day below their asking price of $45 per share and due to unprofitability, they even dropped below $30 at one point. Uber has slowly been on the rise and I’m here to debate the possibility of Uber being a buy. This is just my personal opinion and not any sort of advice.
Profitability
Uber CEO Dara Khosrowshahi said in the latest earnings conference call that originally they expected to turn a profit in 2021, but now bumped that to Q4 of 2020. He didn’t really explain his game plan for that too thoroughly. But global expansion of their rides business and cutting dead weight will be a big factor. They will also be rolling out a subscription service this year.
Cutting Cost
Uber Eats has been dragging down their business in some areas of the world. They sold their Eats business in India and removed Eats from South Korea to help cut cost. Uber Eats just does better in some places than others. For example, in Australia, Eats is comparable to the rides business in other regions. They will also cut out discounts and coupons. Something that helped lure customers in the past to jump start their business.
The Future
Uber has been funded about $1 billion towards research and development in hopes they can start rolling out autonomous driving in 3-5 years. That could be a huge game changer for their business. Imagine a customer paying $100 for an Uber ride. And instead of half or more of that going to the driver, all $100 of it will go to Uber.
Conclusion
Uber could go one of two ways. They could keep bleeding money and suffer through legalities and go out of business. Or they can become the transportation version of Apple or Amazon. Amazon and Apple have multiple businesses and products under them and some are more profitable than others. But together they all form a kind of an ecosystem. I feel that’s what Uber brings to transportation. I didn’t even mention the freight part of their business or their bike business. I hope you enjoyed my opinion on Uber!
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