Stock Analysis & Ideas

Wheels Up Experience: Record Revenue but No Profits

Wheels Up Experience Inc. (UP), formerly Aspirational Consumer Lifestyle Corp., is a private aviation company. It is developing data and technology-driven solutions that connect consumers to safety-vetted and verified private aircraft.

Its offerings include multi-tiered membership programs, on-demand flights across private aircraft cabin categories, aircraft management, retail and wholesale charter, whole aircraft acquisitions and sales, corporate flight solutions, signature events and experiences, and commercial travel benefits.

Wheels Up Experience went public in July, completing a business combination with Aspirational Consumer Lifestyle Corp., a special purpose acquisition company. The gross proceeds raised were more than $650 million.

I am bearish on the first private aviation company to be traded on the New York Stock Exchange. Shares of Wheels Up Experience had losses of 53.5% in 2021, closing at $4.64 a share on December 31, 2021, significantly underperforming S&P 500 and the Nasdaq.

Third-Quarter 2021 Earnings: Record Revenue Announced

Some of the latest Q3-2021 financial results highlights include revenue increasing 55% year-over-year to $302 million, active members growing 45% year-over-year to 11,375 in total, and Live Flight Legs increasing 52% year-over-year to 19,714 in total.

“I am pleased to report another quarter of record revenue, which offers further evidence that the work to expand our fleet offerings, invest in our iconic brand, and serve our high-value customers is setting us apart,” said Kenny Dichter, Wheels Up Chairman & Chief Executive Officer.

Another positive news was that revenue per Live Flight Leg increased 2% year-over-year to $11,076. Why am I bearish now on UP stock? It is not because of its sell-off in 2021. The key reason is twofold. It has to do with the fundamentals and the lack of enough financial information to analyze better trends of key metrics.

Reasons to Be Skeptical despite High Revenue

For the nine months ended on September 30, 2021, Wheels Up Experience reported revenue of $849.21 million, a year-over-year increase of 75%, and a net loss of $120.62 million compared to a net loss of $51.29 million in the nine months ended on September 30, 2020.

Wheels Up Experience stated that “net income (loss) decreased by $(80.0) million due to several factors, including the impact of the company benefiting from the utilization of $51.6 million of CARES Act grant funding in 2020, a decrease in adjusted contribution margin caused by supply constraints and increased operating costs, as well as an increase in equity-based compensation expense, including a broad-based equity grant to the Wheels Up employee pilots.”

I will focus on the supply constraints and increased operating costs for my analysis. It is too early to know with certainty the impact of the Omicron variant on the global travel industry, but on the other hand, it is logical to expect that operating costs can further increase, especially with persisting crude oil prices at about $76 per barrel.

The company is not only losing money, but it is also burning cash. The last three quarters had negative cash from operations.

Another factor that is not that supportive for UP stock is that in its latest investor presentation, Wheels Up stated that the company anticipates generating net operating losses in the near term.

UP stock earnings lack a clear history, but it is logical to expect that they should be volatile. On the positive side, the company has almost zero debt.

It is too early to get excited with record revenue announced in Q3 2021 as the bottom line is not encouraging with net losses and a cash burn problem. I would like to see how the publicly traded company will perform in key metrics such as cash flows from operations, free cash flow, and profitability margins other than rapid sales growth.

Wall Street’s Take

Wheels Up Experience has a Moderate Buy consensus rating, based on three Buys, two Holds, and one Sell rating assigned in the past three months. The average Wheels Up Experience forecast of $9.98 implies 125.3% upside potential.

Download the TipRanks mobile app now, available on iOS and Android.

Disclosure: At the time of publication, Stavros Georgiadis, CFA did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

Tired of arriving late to the Big Returns Party?​
Most investors don’t have major gainers like TSLA or NVDA on their radar from the start.
The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype.
​​For the past decade, we have developed and perfected technology designed to help private investors, just like you, find the best opportunities, with the greatest upside potential, in any financial climate.​
Learn More