Ride-hailing company Uber has failed to assure investors of its growth potential or that it can turn a profit anytime soon. This follows the reported second-quarter adjusted sales that fell short of estimates even as the company posted a net loss of $5.24 billion, which is by far the largest ever for the business.
Most of that loss was attributed to stock-based compensation associated with the initial public offering in May, a routine expense for newly public companies.
The adjusted loss; a more commonly used metric for ride-hailing companies, which excludes interest, tax and other expenses more than doubled to $656 million but was not as large as the $979.1m analysts expected.
Consequently, shares of ride-hailing firm fell to a new all-time low of $33.36 during intraday trading on Wednesday in extension of its bear run which saw the stock price drop below $36 for the first time.
The stock plunged more than 6 percent of its market value, bringing its market cap below $60 billion. This is more than $10 billion shortfall from its listing value after its first trading day in May.
What really raised concerns, though, was Uber’s disappointing sales growth. Adjusted revenue in the second quarter increased 12 per cent from a year earlier, the slowest rate in the company’s history. The San Francisco-based company generated $2.87bn in adjusted revenue for the second quarter, below the estimates of $3.05bn.
Uber hasn’t even been public for three months, but investors are wondering how long it can keep growing. Chief executive of the company, Dara Khosrowshahi suggested the business had a broader problem last week, when the company said it would cut about 400 employees in marketing.
Khosrowshahi acknowledged those concerns, while defending the business as one with “growth rates that companies at our scale would kill for”. He emphasised the signs of growth potential.
Gross bookings, a number used to track customer demand, rose 31 percent to $15.76bn and Uber expects to maintain that growth rate for the year, forecasting $65bn to $67bn in gross bookings.
Meanwhile a US-based company Lyft has reported losses and revenue figures that both exceeded estimates and boosted its annual forecast. Lyft, which operates the number two ride-hailing app in the US, indicated that the price war with Uber is abating and that the company expects to lose less this year than in 2018, which was welcome news to investors. Both stocks saw a bump as a result, but much of Uber’s gains were wiped out after it reported results.
“We are definitely seeing the competitive environment improve,” he said. Still, Uber forecasts an adjusted loss of $3bn to $3.2bn this year. “We think that 2019 will be our peak investment year,” Khosrowshahi said. “In 2020, 2021, you’ll see losses come down.” He also confirmed that the battle for market share is easing.
MIKE OCHONMA
