All Hail Breaks Loose


Image source: Sergey Nivens, vkilikov - Shutterstock

What's going on?

US ride-hailing company Uber needed a pick-me-up on Monday: it beat analysts’ third-quarter profit expectations and announced it’d lose less money than it thought this year, but its stock price still initially fell 5%.

What does this mean?

Uber may have reported a smaller loss than investors expected, but its third-quarter revenue wasn’t as high as hoped either. Passengers might’ve been put off catching a ride after it upped prices earlier this year – especially when there are so many rivals around the world with spare seats on offer. Still, Uber now thinks it’ll lose slightly less than the $3 billion investors had forecast: spending less on user growth could help the company turn a profit sooner than expected.

Why should I care?

The bigger picture: The road to El Dorado.

Investors’ priorities appear to have shifted: revenue growth is great, sure, but what “defensive” investors seem to really want is profit. Last month, Uber’s US rival Lyft announced it expects to be profitable by the end of 2021 – a year sooner than expected. When it reported its own third-quarter earnings last week, it lost $90 million less than expected, leaving expectations in its dust. But since Uber has more to think about than just ride-hailing, it might take longer to wave the profitability finish flag – which could frustrate some would-be backers.

For markets: Achievement unlocked.

Uber’s shares may have fallen on Monday in part due to the shadow cast by Wednesday’s share “lock-up” expiry. That’s when some of Uber’s early investors will finally be allowed to sell the shares they weren’t allowed to sell in the period right after its initial public offering (tweet this). If they choose to cash out, and if the extra supply of shares isn’t matched by equal demand, Uber’s stock price could fall. That same threat to Beyond Meat’s stock sent it down 40% in October, including a 22% drop on a single day last week.

Originally posted as part of the Finimize daily email.

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