What's happening
Shares of ridesharing giant Uber Technologies (UBER +8.64%) opened sharply lower on Friday, after the company reported sales that fell short of Wall Street estimates and posted its largest-ever quarterly loss.
Uber's share price fell nearly 10% in early trading, but it recovered somewhat as the session went on. As of 11 a.m. EDT today, shares were trading about 7% below Thursday's closing price.
So what
Second-quarter results showed growth, but not as much as Wall Street had expected. Adjusted net revenue of $2.87 billion was up 12% from the year-ago quarter, but it fell short of the Wall Street average estimate of $3.05 billion as reported by Bloomberg. The problem: While Uber's business is growing more rapidly than those numbers suggest, the incentives that it needs to pay to retain drivers are cutting into net sales.
Image source: Uber Technologies.
As for the bottom line, while Uber investors aren't expecting fat profits anytime soon, its second-quarter net loss of $5.2 billion was sobering. Much of that came from a big one-time charge related to stock-based compensation following Uber's initial public offering in May, and Uber's adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) did more than double to $656 million. But it's still a very big number for investors to digest.
Now what
During Uber's conference call, CEO Dara Khosrowshahi pointed out that second-quarter gross bookings, a key indicator of customer demand, rose 31% to $15.76 billion, and he said that Uber expects to maintain that growth rate through the end of 2019.
But in light of the better-than-expected sales growth posted by much smaller rival Lyft (LYFT +0.99%) earlier on Thursday, Uber's results may have investors asking whether the company is now so large that lower growth rates are inevitable.
