Shares of Uber (UBER) were smacked on Friday, closing lower by 6.8% to $40.05 after the company delivered its second disappointing earnings report since going public.
Uber has had one of the more disappointing initial public offering debuts in recent years. After pricing at $45 a share, the stock couldn't exceed that level in its first day of trading. At its lows on the second day, it was down about 20% from the IPO price.
For a company of this size and with this much hype, it was highly disappointing -- perhaps the most disappointing IPO since Facebook (FB - Get Report) went public in 2012. However, Facebook stock has increased more than 10-fold from its post-IPO lows. Will Uber be able to say the same thing? Not for a while, at least.
A quarterly loss of $4.72 a share -- equating to more than $5 billion -- stole the headlines. It deals a blow to investors' fragile sentiment, as they wonder if Uber will ever become profitable. In this regard, the outlook is not inspiring.
As Kevin Curran wrote on Uber, Real Money's Stock of the Day, "looking into 2019, Uber said increased spending and expansion costs will likely mean the group posts a full-year loss of between $3 billion and $3.2 billion, showing no signs of shrinking losses as the company remains in 'investment mode.'"
Trading Uber Stock
Uber stock was ripping higher on Thursday, climbing 8% ahead of its results. That type of price action is generally not constructive for a post-earnings move, even if the results are well-received.
In any regard, Uber stock now faces a make-or-break situation: Either the recent lows near $38.50 hold or they fail. If it's the former and support holds strong, look to see if Uber stock can reclaim the $42 mark. Above that and the 50-day is on the table, a level Uber stock couldn't reclaim on Thursday despite its big rally.
The breakout over its $45 IPO price seems a long way off now, particularly with so many levels overhead at the moment.
But here's why the $38.50 is so vital. This mark is now a must-hold level given that it buoyed Uber stock for three straight sessions amid a market-wide rout earlier this month. If this level fails as support, it opens up the floodgates to more selling.
In that event, the $37 mark is possible. Below that and the 52-week low of $36.08 is possible. If that mark is breached, Uber stock could find itself in no man's land and tumbling lower.