These days, Wall Street is a difficult client, yet Uber just received a sizable tip UBER stock 10.80%increase; green up pointing triangle.
Due to macroeconomic headwinds, currency fluctuations, and—in the case of Meta Platforms—heavy investments made despite a slowing economy, a large portion of the tech sector has fallen so far this earnings season. However, Uber is defying the trend. Higher prices and lower expenses helped lift third-quarter revenue and adjusted earnings before interest, taxes, depreciation, and amortization past Wall Street’s projections, despite reports that trips per monthly active platform consumer were still below pre-pandemic levels.
In addition, the company’s fourth-quarter outlook was better than anticipated because of Uber, which provided earnings guidance far above consensus projections.
Uber’s focus has recently switched away from expansion and toward earnings and cash flow. An audacious objective for a corporation that had burned through $2 billion only a few years ago, the company stated in February that it anticipated turning free cash flow positive. Uber said on Tuesday that it has earned about $700 million in free cash flow so far this year, attributing this to its global scale and network effects after posting its first-ever quarter of positive free cash flow in the second quarter.
Following its third-quarter report, Uber shares increased 15% in early Tuesday trading.
Investors were already benefiting from the bottom line focus: Just 15% had been lost from Uber stock during the previous six months as of Monday’s market close. Competitor Lyft in the ride-sharing industry lost more than 50% of its market value during the same time frame, and DoorDash in the food delivery industry lost close to 50%. Due to the current high currency, both of those businesses have historically been more U.S.-focused, which should have benefited them. For instance, Uber reported a $380 million disadvantage from foreign exchange on its own gross bookings in the third quarter. It also stated that, on a constant currency basis, its delivery gross bookings in the United States and Canada increased by 19% year over year last quarter, but only by 8% year over year in all other areas.
Uber can continue to surpass its competitors. Revenue in the third quarter, which was up 72% year over year, considerably surpassed gross bookings, according to the business. According to Wall Street estimates, third-quarter revenue growth for DoorDash and Lyft was just 22% and 28%, respectively, over the same time. Lyft is scheduled to release its own third-quarter results on November 7; Lyft is scheduled to report on Thursday.
It’s true that these revenue comparisons are far from being fair. For its mobility division, Uber, for instance, announced $1.1 billion in top-line advantages in the third quarter from modifications to the U.K. business model. It also highlighted large benefits from the acquisition of logistics technology startup Transplace last year. If only the U.K. model changes had not been made, the growth in Uber’s mobility revenue would have been about 23%. Separately, including foreign exchange, delivery income increased by 24%.
However, it is not growth that is boosting Uber’s stock; rather, it is the way the business has handled it. According to Uber, its mobility business’s adjusted Ebitda benefited from a “significant reduction” in expenditures in the driver pool, while its delivery margins benefited from a push toward higher-margin ad revenue and network efficiencies. According to a report by Gordon Haskett’s Robert Mollins, Uber’s wait times and prices for its mobility business have been improving at a quicker clip than Lyft.
Incredibly, Uber did this while also expanding the number of taxi bookings available through its app. The business claimed that the run rate for gross annualized bookings for Uber-hail vehicles is already tracking at $1 billion. According to Uber, offering more transportation options to the platform enhances per-rider spending and overall retention in addition to drawing in new users.
Uber aspires to develop into a “super app,” providing a wider range of services in the mobility and delivery sectors. While “super” might be a stretch, Wall Street at least seems to have chosen outstanding for the time being.
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