Ridesharing firm Uber Technologies (NYSE: UBER) is due to report its second-quarter results later today. I’ve been taking a fresh look to see what investors can expect. Are these numbers likely to put Uber’s falling share price back into top gear?
What to watch for
Uber’s revenue numbers make it clear this tech group is already a big business. Even in 2020, with widespread lockdowns, Uber’s annual revenue topped $11bn. However, the group hasn’t yet become profitable and reported a loss of nearly $6bn last year.
According to analyst Monte Safieddine at trading platform IG, Uber’s first-quarter results showed a loss of $0.54 per share, which was slightly smaller than expected. Safieddine says Q2 forecasts are pointing to a quarterly loss of $0.51 per share — a slight improvement.
City analysts expect Uber’s revenue to rise to a new record of $15.8bn this year. However, I believe a key factor driving Uber’s share price will be whether the company can confirm it’s on track to become profitable (on an adjusted EBITDA basis) by the end of 2021.
IG’s analysis suggests there’s a risk Uber shareholders “might have to wait a bit longer” for the firm to move into the black. I’ll be watching closely for more details in today’s numbers.
Why Uber could surprise
IG’s Safieddine also points out there are a number of factors that could affect Uber’s share price performance and earnings. One that interests me is what will happen in September when Covid-19 unemployment benefits, such as furlough (in the UK), finally come to an end.
IG says demand for drivers is currently high, resulting in longer wait times for customers and higher prices. I’d guess that’s positive for Uber’s profitability. But if the company sees a flood of new drivers hit the market in October, this situation could change.
Another factor that could influence driver availability is the rising price of used cars. This is due to semiconductor shortages limiting supply. Uber drivers could face higher start-up costs than pre-Covid. I wonder if pay rates might have to rise.
Uber share price: what I’ll do
I’m always very careful about investing in loss-making companies. In my experience, there are simply more things that can go wrong than at profitable businesses.
However, I think Uber shares could be worth considering at current levels. If the company can show it’s still on track to become profitable from next year, then I think Uber’s share price could rise on a long-term view (three years or more).
To be clear, though — I think there’s still some risk that Uber will struggle to become profitable enough to justify its $80bn valuation. In my view, there’s still a lot of growth priced into this stock.
I see Uber as a speculative long-term buy only. This tech group is a share I might invest a small amount in, then forget about for a few years.
