What happened to Uber?

It will soon be a month since the stock of Uber debuted on NYSE. We kept you informed about the company’s IPO. Now it’s time to re-evaluate the stock as the ridesharing firm has released the first earnings report since it went public.  

Why is it important?

In general

Uber’s Initial Public Offering left many investors perplexed. Earlier this year everyone had been excited to get a piece of it, but then serious doubts emerged. The company’s earnings cheered up the price on Friday but not by much.

For investors

The key question for Uber shareholders and wannabe investors was not how big the company’s profit was, but whether its loss turned out to be small enough. The net loss of $1.01 billion for the quarter was in line with analysts’ expectations. The overall revenue rose by 20% y/y and accounted for $3.1 billion. This figure was at the top end of the expected range. That’s not too bad, right?

Notice that the number of trips booked on Uber and the number of its monthly active users kept increasing. Among the segments of the business, Uber Eats was the growth engine. We can expect numbers like this to keep improving in the future. However, beware that this alone is not enough to make the stock appreciate sustainably. For that, the company has to fix its business model somehow. For now, it can’t have good margins because of how much it pays to its drivers. Uber Eats looks promising but its expenses are even greater as it’s necessary to pay not only to drivers but also to restaurants.

In the meantime, each quarter without profit will make investors more and more reluctant to buy Uber. As a result, the stock still looks like a big question mark. The only reason to add it to a portfolio can be a very long-term bet.     

For traders

Uber stock is still trading below the IPO price. For the near term, it’s possible to distinguish the resistance line at $41.55 and the support line at 39.60. If the price breaks out of the range between them, we’ll target $44 or $37 respectively.

The 4-hour chart of Uber Technologies Inc.
Uber Technologies Inc., 4-hour chart

Stocks can be traded as a CFD at Markets.com.