Uber Eats will need to improve Ebitda by $300 million for the fourth quarter to get Uber back to break-even, according to the firm’s math.
Bernstein called Uber Eats the engine behind Uber’s 71% growth in bookings, but also noted that the segment sees significant losses. So even though Eats is currently in the top two of food delivery services in 60% of its countries, the cost of the service to Uber makes it an albatross.
To improve the economics of the segment, Bernstein suggested the company divest from its underwater markets (like Italy and Spain), invest in countries and buy its way into top-two positions in countries where that is possible, and select locations or products in a country that have room for growth.
“The push on market rationalization is not new for Uber. Over the past few years, management has exited ride-sharing in China (in exchange for a stake in Didi), divested Rides and Eats in Southeast Asia (in exchange for a stake in Grab), and pulled out of Russia (for a stake in a JV with Yandex). All of this shows a willingness to cut the cord on investments that aren't gaining traction,” Shmulik said.
Bernstein has an outperform rating and $40 price target on the stock. Uber shares were rising 2.6% to $33.70 in trading on Tuesday.