Uber is expected to report a third quarter loss per share of (65c) on revenue of $3.2B
Uber Technologies (UBER) is scheduled to report results of its third fiscal quarter after the market close on November 5, with a conference call scheduled for 4:30 pm EDT. What to watch for:
1. GUIDANCE, COVID COMMENTARY: When Uber reported its Q2 earnings results on August 6, the company said it saw Q3 adjusted EBITDA loss to be in line with Q2, adding that it believed it could achieve EBITDA profitability some time in 2021. "Our team continues to move at Uber speed to respond to the pandemic's impact on our communities and on our business, leading our industry forward with new products and safety technologies, and harnessing the strong tailwinds driving exceptional growth in Delivery, with Gross Bookings growing 122% year-over-year excluding exited markets," said Uber CEO Dara Khosrowshahi. "We are fortunate to have both a global footprint and such a natural hedge across our two core segments: as some people stay closer to home, more people are ordering from Uber Eats than ever before." Khosrowshahi added that the U.S. reopening has been uneven, saying that the Delivery segment saw "massive acceleration" and alone is now as big as the Rides business. The CEO said that trends in Europe had been encouraging, and that Uber's global geographic presence is a "huge advantage."
2. PROPOSITION 22 PASSES: California voters approved Proposition 22, an initiative that exempts ride-sharing and delivery companies from a new California law that forces such companies to reclassify their workers as employees rather than contractors and offer benefits such as unemployment protection. Proposition 22 should also undermine the lawsuit against Uber and Lyft (LYFT). California had brought the suit against both companies for allegedly violating the new law. Almost entirely funded by gig-economy giants, the campaign in support of Proposition 22, also known as "App-based drivers as contractors and labor policies initiative," spent over $200M, while opponents of the measure have spent about $14M to defeat it, making it the most expensive ballot race in the state.
Deutsche Bank analyst Lloyd Walmsley raised his price target on Uber to $54 from $38 and kept a Buy rating on the shares. The analyst likes Uber and Lyft shares over the medium term "as the major political overhang lifts" with the passage of Proposition 22. The promises as part of the bill will lead to higher costs, but much of that can be passed along to consumers, and odds of further regulation in the U.S. looks significantly lower post the election results, Walmsley noted. The analyst continues to see a "choppy recovery" on the ride share business near-term given spiking COVID cases, but he believes both Uber and Lyft shares are "poised to see a continued recovery as vaccine news, improving success treating the virus and better testing capacity gets wider distribution."
3. UBER CAN CONTINUE TO OPERATE IN LONDON: On September 28, Deputy Senior District Judge Tanweer Ikram said Uber Technologies can continue operating in London, ruling the company is "fit and proper" to operate in the city. "Despite their historical failings, I find them, now, to be a fit and proper person" to hold a London license. The judge granted a London Private Hire Vehicle operators licence to Uber London Limited for a period of 18 months "with conditions as agreed by parties."
4. YANDEX SPIN OFF: Yandex (YNDX) said on September 4, "Yandex and Uber entered into agreements to spin off the self-driving vehicles business, Yandex Self Driving Group from their ride-hailing and foodtech joint venture, MLU B.V. Following these transactions, Yandex SDG will be directly owned by Yandex and Uber. Yandex will continue to consolidate the results of Yandex SDG and will be reporting Yandex SDG results in the 'Other Bets and Experiments' segment of Yandex N.V. Simultaneously with the spin off transaction, Yandex will invest $150M into Yandex SDG, $100M of which will be in the form of equity and the remaining $50M in the form of a convertible loan. Yandex will also purchase a portion of Uber's stake in Yandex SDG. As a result of the transactions, Yandex will own 73% of Yandex SDG, while Uber will own 19%. The remaining 8% will be reserved for Yandex SDG management and employees. Yandex's cumulative investment in SDG to date has been approximately $65M, including around $20M in the first half of 2020. Recently, Yandex launched Yandex.Rover commercial operations in the Russian tech hub of Skolkovo. Yandex SDG is also planning to launch its autonomous mobility services in Ann Arbor, Michigan, and Tel Aviv, Israel in the near term. The transaction is subject to customary closing conditions and is expected to close in Q3."