The numbers are in for Uber’s second quarter, and in this roundup, senior RSG contributor John Ince breaks down what these numbers mean. Plus, is Uber overvalued? The rush to buy more cars for Uber in NYC, and more.
Uber cuts its losses, and revenue soars 63% [Money/CNN]
Sum and Substance: Uber’s financial picture improved in the second quarter: Its revenue jumped and its losses narrowed.
According to a copy of Uber’s latest results, viewed by CNNMoney, Uber’s quarterly revenue was $2.8 billion, up 63% over last year. The company lost $891 million, down from $1.1 billion a year ago. Gross bookings from customers increased 41% to about $12 billion.
In May, the company reported a rare profit during the first quarter, because it had given up two of its operations abroad to competitors. Uber regularly releases its financial results, even though as a private company it’s not required to do so.
The company has said it is considering an initial public offering in 2019…
My Take: Wait, Uber CEO Dara Khosrowshahi says Uber “had another great quarter” despite losing $891 million. Come on guys. Of course you can increase gross bookings when you’re pricing your service well below cost. Throw in $200 million for autonomous vehicles and an acquisition of two and – presto – you’ve lost $891 million, a larger loss than any private company in history except, well, Uber.
Uber regularly lost somewhere near a billion a quarter last year. This is not sustainable. This is not a company like Amazon, where the losses represented investments in infrastructure, like shipping centers, web services etc. What’s really strange is that investors seem okay with all this. What’s wrong with this picture? (See article below)
Credit Market’s ‘Eyeball Valuations’ Raise Investors’ Eyebrows [Bloomberg]
Sum and Substance: Around the start of the millennium, high-flying dot-coms said their companies were worth hundreds of millions based on unusual yardsticks like how many viewers were looking at their websites. In frothy debt markets now, companies want credit for their Instagram followers.
Firms like ride-sharing company Uber Technologies Inc., cosmetics maker Anastasia Beverly Hills and electric carmaker Tesla Inc. are telling debt investors to set aside the fact that future profitability may weaken or that they may not be earning profit at all, and to focus instead on the growth they’re planning, their high equity valuations and the outside cash they’ve raised.
Some investors may be skeptical, but enough are buying the debt to get deals done. The demand shows how willing money managers are to take risk even in what is widely seen as the late stages of an economic expansion, when the worst deals are often made. If fund managers aren’t careful, they are bound to lose out as interest rates march higher and newer companies struggle to meet their obligations.
“Things like clicks don’t pay bond interest,” said Scott Roberts, head of high-yield investments at Invesco Ltd., which manages $963 billion. “We have to keep in mind that companies are doing whatever they can to lower their cost of capital.”
… Even so, as investors learned in the dot-com bubble, equity valuations can plunge fast. Pets.com famously went from IPO to liquidating itself in less than a year. The alternative valuation metrics of that era, like “eyeballs,” “monthly unique visitors” and “stickiness” looked idiotic by late 2000. …“When the downturn happens, some of those creative interpretations of valuations fall away,” he said. “That can get pretty ugly.”
My Take: I include this Bloomberg article on Uber’s earnings in the roundup because it gives a little more context than the above article about how investors may view the most recent revenue and earnings figures released by Uber. Seems to me things are getting a bit frothy in the tech world and Uber is Exhibit A at a valuation of almost $70 billion, when they’ve managed to lose over $11 billion with no sign of profitability on the horizon.
Why these Uber drivers rushed to register cars before the ride-share cap [New York Post]
Sum and Substance: TLC flooded with applications before ride-share cap kicks in … Kazi Arefin braved lines and crowds to register his car for Uber because he was tired of making money for other people.
The 27-year-old Brooklynite has been driving for Uber and Lyft for two years but got tired of renting his car for $1,700 a month. “Of course it’s a better deal to get your own car. The payment is less and then whatever I’m investing, it’s my property,” he said.
And he wasn’t the only one. Arefin says car dealerships were doing gangbusters since the City Council passed the Uber cap last week, because drivers were scrambling to get their own cars and register them before the moratorium kicked off Tuesday.
He’d been planning buying a car for a while, but the looming cap accelerated his timeline.
“It was a difficult decision because it’s a lot of money to invest,” Arefin said.
Uber has said the cap will hurt customers, but Arefin said he supports the measure because he believes it will ease traffic congestion and “control the flow.”…
My Take: Driving for Uber/Lyft may not be the greatest gig in the world, but it’s an economic lifeline for many. Those people who depend on their Uber income will do almost anything to stay in the game, including waiting for hours in the pouring rain to get in before the cutoff takes effect in New York City.
Uber told by investors to sell self-driving unit: The Information [Reuters]
Sum and Substance: Investors have told Uber Technologies Inc [UBER.UL] it would be wise to sell off its self-driving car unit after it racked up losses of $125 million to $200 million each quarter for the past 18 months, tech news site The Information reported on Wednesday, citing an unnamed person familiar with the issue…. Uber did not immediately respond to a Reuters request for comment. Uber is due to release its second-quarter earnings to investors later on Wednesday.
My Take: Uber is reportedly boring through upwards of $200 million a quarter on its self-driving unit, yet they remain far behind Waymo and others. I say: SELL! What do you say?
Readers, what do you think of this week’s round up?
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-John @ RSG