Uber Technologies Inc. (UBER) posted a $2.9 billion loss in the first quarter as the coronavirus pandemic curtailed demand for ridership.
The ride-hailing company said the $2.9 billion loss included a $2.1 billion pretax writedown of the value of some of Uber’s minority investments. Excluding the writedown, Uber posted a loss of 64 cents per share, compared with analysts’ expectations of an 88-cent loss. Total revenue in the first three months increased 14% to $3.54 billion year-on-year.
“While our Rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet, focus additional resources on Uber Eats, and prepare us for any recovery scenario,” said Uber CEO Dara Khosrowshahi. “Along with the surge in food delivery, we are encouraged by the early signs we are seeing in markets that are beginning to open back up.”
Khosrowshahi said that although rides bookings were down 80% in April, total bookings were only off about 40%, helped significantly by the company’s Eats business. First-quarter revenue generated from restaurant food deliveries increased 53% to $819 million as the coronavirus-related stay-at-home orders boosted demand for the service.
“Eats has also allowed us to bring in new customers onto our platform,” said Khosrowshahi. “This positions us to have a faster recovery than Rides only players.”
The ride-hailing company announced this month that it will cut about 3,700 full-time positions, while Khosrowshahi will forego his base salary this year.
“The actions we’ve taken and the actions we intend to take in the near future will result in a reduction of more than $1 billion in annualized fixed cost versus our Q4 plan,” said Khosrowshahi. “Reaching profitability as soon as possible remains a strategic priority for us. We believe the disruption caused by COVID-19 will impact our timeline, but by a matter of quarters and not years.”
Shares in Uber jumped 6% to $32.79 on Friday as investors and analysts welcomed the ride-hailing company’s cost-cutting plan and momentum in delivery orders amid signs of a slow recovery as markets start to reopen.
Wedbush analyst Ygal Arounian maintained the stock’s Buy rating and raised the price target to $38 from $30.
“Uber is seeing much pain as demand has come to a screeching halt, however the last few weeks ride volume has increased and is a bright spot in a dark backdrop,” Arounian wrote in a note to investors. “To this point, right now the star of the show is Eats. But Uber is making tough decisions and while Eats is offsetting weak rides demand, profitability remains a factor.”
Wedbush increased the company’s 2Q20E revenue expectations by 20%, reflecting the stronger than expected performance at Uber Eats, where revenue is now estimated at $853 million versus $368 million previously.
Overall, Wall Street analysts have a bullish outlook on the company’s stock as 25 out of 26 award a Buy rating, and 1 has a Sell rating adding up to a Strong Buy consensus rating. The $39.75 average price target projects shares will appreciate 21% in the coming 12 months. (See Uber’s stock analysis on TipRanks).