Uber reports earnings before Tuesday’s opening bell
It wasn’t too long ago that the ride-hailing market seemed like a race to the bottom, but Uber Technologies Inc. has managed to get on a different path.
Uber UBER, +2.74%, which once faced heated investor skepticism about its ability to satisfy both riders and drivers in a competitive market while also investing in businesses like freight, has won Wall Street’s heart this year, with shares up nearly 100% so far in 2023.
The company’s Tuesday morning earnings report will show whether that rally was justified — and it also could indicate whether Uber is at the beginning of a pivotal trend.
Uber is now on the cusp of showing GAAP profitability for a sustained period, in the view of analysts. The company theoretically could start its streak this quarter, as analysts project a 1-cent GAAP loss per share on average, but some see the potential for positive earnings. Regardless, the consensus view is for a string of GAAP profits in the third quarter and beyond.
That’s key for Uber as analysts begin to anticipate the stock’s inclusion in the S&P 500 SPX, +0.15% at some point next year. To be eligible, Uber would need to show GAAP profitability on a trailing-12-month basis and specifically to sport GAAP profits in the quarter before its potential inclusion.
Uber “is poised to deliver on improving profitability, capital discipline and healthy growth,” Bernstein analyst Nikhil Devnani wrote in a note to clients last week. “Index inclusion can be the cherry on top.”
Evercore ISI analyst Mark Mahaney titled his earnings preview for Uber: “Stepping On The Profitability Accelerator.”
While the company certainly isn’t gearing up for a “low-bar” report given the strong stock rally so far this year, he thinks it can deliver “modest upside” on adjusted earnings before interest, taxes, depreciation and amortization (Ebitda), “given the ongoing recovery in driver supply, which should translate into improved unit economics.”
Here’s what else to watch for in Uber’s Tuesday morning second-quarter report.
What to expect
Earnings: The FactSet consensus is for a 1-cent GAAP loss per share, while Uber logged a $1.33 GAAP loss per share in its year-earlier quarter.
Revenue: Analysts tracked by FactSet model $9.3 billion in second-quarter revenue, up from $8.1 billion a year prior.
Stock movement: Uber shares have gained following each of the company’s past four earnings reports, and they’ve seen double-digit percentage increases in three of those four reports.
Of the 45 analysts tracked by FactSet who cover Uber shares, 41 have buy ratings and four have hold ratings, with an average price target of $53.03.
What else to watch for
Oppenheimer’s Jason Helfstein sees the stock as his top pick heading into earnings, writing that Uber has the potential to benefit from increased spending on travel and other experiences, as well as the continued return to work.
He’ll be watching for indications of future upside ahead, noting that driver supply appears to be below March 2020 levels, meaning that there could be room for it to move higher as more West Coasters return to work in the second half of the year.
Wedbush’s Scott Devitt also thinks that Uber will have benefited from “tailwinds for mobility demand stemming from the gradual return to in-office work, the recovery in corporate travel, and ongoing strength in leisure travel demand.”
RBC Capital Markets analyst Brad Erickson, meanwhile, wonders if a change to the company’s leadership suite is on the horizon, following a Reuters report from mid-July saying that Chief Financial Officer Nelson Chai was planning to leave his post. (Uber didn’t immediately respond to MarketWatch’s request for comment Tuesday on his plans.)
Erickson wrote that such a move wouldn’t necessarily come as a shock, especially since Alphabet Inc. GOOG, +0.08% GOOGL, +0.11% recently announced plans to elevate Chief Financial Officer Ruth Porat from that position.
If Chai were to leave, it “would be a headline negative obviously as not only has Chai been well-regarded by [Uber] since leading the [initial public offering] in 2019, but it would also likely be taken as a signal of less likely updates to long-term targets if and as a new person was getting into the seat,” he wrote.