Share prices of Uber Technologies (UBER -2.94%) surged 19% on Aug. 2 after the ride-hailing and delivery service posted second-quarter results. Its revenue soared 105% year over year to $8.1 billion, beating analysts' expectations by $700 million. Its gross bookings -- a measure of the total dollar value of its ridesharing, delivery, and freight services that excludes tips, discounts, and refunds -- rose 33% to $29.1 billion.
But Uber still posted a net loss of $2.6 billion, compared to a net profit of $1.1 billion a year earlier, mainly due to a $1.7 billion headwind from its equity investments. As a result, its net loss of $1.33 per share broadly missed analysts' expectations by $1.06. But on the basis of adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), which excludes those hefty equity losses, it posted a net profit of $364 million, compared to a net loss of $509 million in the prior-year quarter.
Image source: Uber.
Do those numbers indicate it's finally safe to buy Uber stock, which remains roughly 35% below its IPO price even after its post-earnings rally? Let's review its growth rates, challenges, and valuations to decide.
A strong post-lockdown recovery
Uber's MAPCs (monthly active platform consumers), total trips, gross bookings, and revenue all tumbled in 2020 as more people stayed at home during the pandemic. The growth of Uber Eats, which benefited from those lockdown measures, couldn't offset its loss of ride-hailing revenue.
But business recovered quickly in 2021 as the lockdown measures were eased and people started to go out again. That recovery continued in the first half of 2022, and it ended the second quarter with 122 million MAPCs worldwide, compared to 93 million MAPCs at the end of 2019.
|
Metric (YOY) |
2020 |
2021 |
Q1 2022 |
Q2 2022 |
|---|---|---|---|---|
|
MAPC growth (decline) |
(16%) |
27% |
17% |
21% |
|
Trips growth |
(27%) |
27% |
18% |
24% |
|
Gross bookings growth |
(11%) |
56% |
35% |
33% |
|
Total revenue growth |
(14%) |
57% |
136% |
105% |
Data source: Uber. YOY = year over year.
For the third quarter, Uber expects its gross bookings to rise 26% to 30%. During the conference call, CEO Dara Khosrowshahi predicted Uber would "continue to benefit from a secular increase in the on-demand transportation of people and things, as well as a shift back from retail spend to services spend," even as it faced an "uncertain global economic environment and considerable foreign-exchange headwinds."
Analysts expect Uber's total revenue to increase 80% to $31.4 billion in 2022, then grow another 16% to $36.4 billion in 2023.
Prioritizing profits and free cash flow
Uber still isn't profitable on the basis of generally accepted accounting principles (GAAP), but a large portion of its net losses can be pinned to its investment-related losses on Grab Holdings, DiDi Global, Zomato, and Aurora Innovation.
Uber previously sold its struggling business in Southeast Asia, China, and India to Grab, DiDi, and Zomato, respectively. It also sold its money-losing ATG (advanced technologies group), which mainly was developing driverless cars, to Aurora. Those deals granted Uber equity stakes in all four companies, but their market valuations crumbled over the past year. Uber could reportedly sell its stakes in DiDi and Zomato to curb its losses in the near future.
But if we cut through all that near-term noise, we'll notice that Uber's adjusted EBITDA actually turned positive in the second half of 2021 and continued to increase sequentially in the first half of 2022.
|
Metric (YOY) |
2020 |
2021 |
Q1 2022 |
Q2 2022 |
|---|---|---|---|---|
|
Net income (loss) |
($6.8 billion) |
($496 million) |
($5.9 billion) |
($2.6 billion) |
|
Adjusted EBITDA |
($2.5 billion) |
($774 million) |
$168 million |
$364 million |
Data source: Uber. YOY= year over year.
In the third quarter, Uber expects its adjusted EBITDA to increase sequentially again to a range of $440 million to $470 million. During the call, chief financial officer Nelson Chai attributed that growth to its "gross profit improvement across both mobility and delivery." Khosrowshahi also predicted the company could continue capitalizing on its secular growth tailwinds in a "profitable manner."
That profit growth was impressive, especially considering that Uber boosted its wages and fuel incentives during the quarter to help its drivers cope with inflation.
Analysts expect Uber to generate an adjusted EBITDA of $1.5 billion for the full year, and for that figure to more than double to $3.3 billion in 2023. They also foresee a narrower net loss in 2023 as the company moves past its investment-related headwinds, as well as its first GAAP net profit in 2024.
Lastly, Uber's bottom-line growth enabled it to generate a free cash flow (FCF) of $382 million in the second quarter, which represented the first time its quarterly FCF ever turned positive.
Uber's business is finally stabilizing
Uber currently trades at less than two times this year's sales and about 38 times its adjusted EBITDA. Lyft, which is smaller than Uber but benefiting from the same tailwinds, trades at 1.3 times this year's sales and 24 times its adjusted EBITDA.
Uber's stock isn't a screaming buy yet, but its business is recovering, it's surprisingly resistant to inflationary headwinds, and its bottom line is stabilizing. Therefore, I think the stock is worth nibbling on right now -- but investors shouldn't assume it's bottomed out in this tough market yet.
