One of this unique earnings season’s quarterly reports played out according to the guidebook. Uber’s (UBER) Q2 saw its ride sharing business display its coronavirus wounds, as the stay-at-home and social distancing measures weighed heavily on bookings. On the other hand, boosted by the demand for food delivery services, Uber Eats bought home the goods.
Overall, Uber posted Q2 revenue of $2.24 billion, a 29.3% year-over-year decline, yet above the estimates by $60 million. However, a loss of $1.02 per share missed consensus by $0.14.
Mobility revenue – formerly Rides – dropped by 67% year-over-year to $790 million. Countering that segment’s decline, Delivery revenue – formerly Eats – grew 103% year-over-year to $1.21 billion.
Gross bookings declined by 35% year-over-year to $10.2 billion, with Mobility gross bookings dropping by 73%. Delivery gross bookings increased by 113% compared to the same period last year yet came in lower than the Street’s estimated 120% uptick.
So, all in all, no big surprises. For Wedbush analyst Ygal Arounian, the strong performance of Uber’s Delivery segment offers the quarter’s key takeaway. However, going forward, the challenge lies in turning a profit in the margin tight and crowded food delivery space with several players vying for dominance.
The 5-star analyst said, “The competitive landscape in the US and globally will continue to lead to discounting both on the consumer side and restaurant side in the near-term as Uber and its peers vie for market share and the influx of new buyers. But Uber did see an improvement in take rate during the quarter and while segment EBITDA losses were still large, they did moderate as a percentage of revenue.”
So, down to the nitty gritty what does it mean for investors? Arounian reiterated an Outperform (i.e. Buy) rating on Uber, although “reflecting the continued uneven pandemic recovery globally and mobility demand,” the price target gets a trim and is reduced from $47 to $41. Upside potential from current levels is still a healthy 31%. (To watch Arounian’s track record, click here)
Out on the Street, there are plenty of Uber bulls. Among the 29 analysts to have posted a review over the past 3 months, 4 say Hold, while all the rest say Buy. Uber’s Strong Buy consensus rating is backed by a $42.38 average price target and implies possible upside of 36% in the year ahead. (See Uber stock-price forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
