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Why Shares of Uber Technologies Are Down Today

By John Rosevear – Updated Aug 9, 2019 at 11:54AM

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Second-quarter sales fell short of expectations, calling its growth story into question.

What's happening

Shares of ridesharing giant Uber Technologies (UBER -0.03%) 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.

A close up of a smartphone's screen showing the Uber and Uber Eats application icons.

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 -0.36%) earlier on Thursday, Uber's results may have investors asking whether the company is now so large that lower growth rates are inevitable. 

John Rosevear has no position in any of the stocks mentioned. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

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