Millennials (those between the age of 25 to 40) overtook baby boomers as America's largest generation two years ago. This core adult cohort spent $1.4 trillion worldwide last year, and they are some of the biggest supporters of the growth of tech platforms that have upended entire industries.

Millennials' usage of social networks disrupted traditional advertising platforms, their love for streaming media services accelerated the death of cable TV, and their desire for commission-free stock trades fed the rise of Robinhood.

Last month, I highlighted three companies that could profit from those shifting trends. But today, I want to examine one millennial-focused stock that doesn't deserve your money: Uber Technologies (UBER -0.13%).

An Uber driver picks up a passenger.

Image source: Uber.

A leader in ride-hailing and food delivery services

Uber owns the largest ride-hailing platform in the United States. It controls 68% of the market, according to Second Measure, while its rival Lyft (LYFT -2.18%) controls the remaining 32%.

About 70% of millennials in the U.S. regularly use one of those services, according to ReportLinker. Uber and Lyft disrupted the traditional taxi market because hailing a ride, tracking its progress, and paying for it with a mobile app were simpler than calling a service or flagging down a taxi.

Uber Eats is also the second-largest third-party food delivery platform in the U.S. It claimed 27% of the market following its takeover of Postmates, according to Second Measure, but DoorDash (DASH 3.33%) still dominates the market with a 55% share. Grubhub (GRUB), which previously led the market, ranks third with a 16% share.

Over half of U.S. customers between the ages of 18 to 34 regularly use one of these food delivery apps, according to Cowen & Co. These apps are easy to use for placing orders and making payments, and they help restaurants provide deliveries without hiring their own couriers.

Uber generates most of its revenue from its two core services, but it also provides package deliveries, freight transportation, and electric bicycle and motorized scooter rentals via its partnership with Lime.

Why is Uber a flimsy investment?

Uber might initially seem like a promising investment, but it has several glaring weaknesses. First, Uber's revenue declined significantly last year, and the company remains deeply unprofitable.

Metric

Fiscal Year 2019

Fiscal Year 2020

Revenue

$13.0 billion

$11.1 billion

Year-over-year growth

26%*

(14%)

Net loss

($8.5 billion)

($6.8 billion)

Data source: Uber. *Using previous accounting method.

Uber struggled last year as its loss of ride-hailing revenue during the pandemic offset the crisis-induced growth of its food delivery platform. But this year, analysts expect its revenue to rise 45% to $16.2 billion as its ride-hailing business recovers. They also anticipate a narrower net loss.

That forecast sounds healthy, but Uber still faces intense competition in the ride-hailing and food delivery markets, which throttles its ability to raise prices and boost its gross margin.

Furthermore, Uber, Lyft, and other "gig economy" platforms all face pressure across multiple states to raise their wages and reclassify their workers from independent contractors to employees.

A sea of red ink ahead

These two headwinds could prevent Uber from ever generating a profit, even in generous adjusted EBITDA terms. Its adjusted EBITDA loss only narrowed slightly last year, and a breakdown reveals some troubling trends:

Adjusted EBITDA by Segment

2019

2020

Mobility

$2.07 billion

$1.17 billion

Delivery

($1.37 billion)

($873 million)

Freight

($217 million)

($227 million)

ATG and other technology programs

($499 million)

($375 million)

All other

($251 million)

($86 million)

Corporate G&A and platform R&D

($2.46 billion)

($2.14 billion)

Total

($2.73 billion)

($2.53 billion)

Data source: Uber. G&A = General and administrative. R&D = Research and development.

Only Uber's core mobility (ride-hailing) business generates a positive adjusted EBITDA. Uber Eats and its freight business are still bleeding red ink, and it dumped hundreds of millions of dollars into its ATG (Advanced Technologies Group) to replace its drivers with autonomous cars.

Uber plans to sell the ATG unit in the first quarter of 2021, but that sale indicates that it won't be using driverless vehicles to outrun tougher labor regulations anytime soon.

Lastly, Uber's adjusted corporate G&A and platform R&D expenses -- which include its corporate headcount costs, development expenses for its app, and its payments to third-party mapping and payment services -- remain unsustainably high.

If it's costing that much to support Uber's internal staff and keep its app running, a reclassification of its drivers as employees would result in even more disastrous losses. Uber's integration of Postmates and other future acquisitions and investments could exacerbate that pain.

Uber's cash and cash equivalents (including its restricted cash) fell 39% year over year to $7.4 billion at the end of 2020 -- but it was still sitting on $8.3 billion in total debt. Meanwhile, its number of outstanding shares continue to climb as it relies on stock-based compensation to conserve its cash.

This stock is cheap for obvious reasons

Uber's stock might seem cheap, at least relative to other high-growth stocks, at less than seven times this year's sales. But its price-to-sales ratio is lower because it faces too many near-term headwinds.

Investors who are looking for millennial-oriented stocks should avoid Uber and focus on other disruptive companies with brighter futures instead.