Is Uber Technologies a buy?
When Uber Technologies reported second quarter earnings last week, the results were unimpressive. Uber's stock dipped after the earnings report, losing 5.19% on Friday.
However, despite the news, the company may be setting itself up for a better future.
Critics will point out that the UBER currently doesn't turn a profit. The company lost $1.08 per share and saw revenue decline by 29% during its most recent quarter.
On a brighter note, Uber's food delivery service saw its business double as bookings jumped by 113%.
What does Uber's chart tell us about its future? A clearly visible double bottom pattern that has formed over the past six weeks. That pattern projects Uber to the $38 area. If Uber can break above $38, the red dotted line, the next level of resistance awaits at $41, the blue dotted line. That figure represents Uber's year-todate high.
Why do I believe that Uber can outperform in the future? Here are three reasons.
First, the stock's minor reaction after a weak earnings report tells us that expectations for the company are already very low. Because of this, Friday's selling failed to disrupt the company's bullish chart pattern.
Second, in a post Covid-19 world, Uber may find itself with less competition, both from smaller ride-sharing startups and from rental car companies.
Finally, Uber's deal to purchase Postmates will provide Uber Eats with greater coverage going forward, both geographically and in terms of variety.
Bottom line: It may take some patience on the part of investors, but Uber's future looks brighter than its present.
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Ed Ponsi is the managing director of Barchetta Capital Management, and is the author of three books for publisher Wiley Finance. A dynamic public speaker, Ed has made appearances around the world, in such diverse locations as Singapore, Dubai, London, and New York. For more information about Ed and his work, click here.