Uber's March quarter results will mark a major test of its business model -- and how much investors are willing to tolerate losses tied to the coronavirus pandemic.
Despite a steep drop in ridehailing demand, Uber (UBER) - Get Free Report shares are down only 5% year to date -- moderate losses compared to smaller rival Lyft (LYFT) - Get Free Report, which is down 37%. With Uber's March quarter financial results and commentary, investors will get a better sense of the durability of Uber's business, which includes food delivery in addition to rides, amid widespread disruption to its core ridehailing segment.
Analysts polled by FactSet are expecting revenues of $3.55 billion and a loss of 80 cents per share for Uber's March quarter. Here's what to watch when Uber reports its latest results on Thursday, May 7 after the close of trading.
1. Coronavirus Impact
With Lyft reporting its March quarter earnings on Wednesday, Uber investors will come into earnings with a preview of what the pandemic has meant for the ridehailing industry. But the differences between the two business models may present some nuance. For one, Uber operates internationally -- and is more exposed than Lyft is to business and airport travel, wrote Wedbush analysts in a recent note.
"As Uber is exposed to earlier-hit markets in Europe and Asia, we expect demand for the company to have been more greatly impacted than Lyft in 1Q20E, with a 38% Y/Y decline in MAPCs [monthly active platform consumers] vs. a 30% decline in riders for Lyft," wrote Wedbush analyst Ygal Arounian.
Looking ahead, Uber -- along with many other firms -- withdrew its 2020 financial guidance owing to uncertainty created by the virus. But management will likely offer commentary on what it saw in April to gauge where it's headed this quarter and for the rest of the year.
2. Uber Eats
One of the distinctions between Uber and its smaller rival is that Uber offers services other than personal mobility. Uber rides may have dropped precipitously this spring, but with consumers staying at home, demand for food delivery has increased. Investors will soon find out whether Uber Eats has offset declines to Uber's ridehailing service in a meaningful way -- and what Uber's more diversified business, versus Lyft, means for its future results. Uber Eats may be a value add for the consumers in the pandemic, but it also faces many competitors and pressure on fees from struggling restaurants and local governments, Wedbush's Arounian noted.
In the meantime, Uber appears to be doubling down on scooter rentals. The company is in talks to lead a $170 million round of financing in Lime, according to The Information, adding to its existing minority stake in the scooter firm. The proposed deal, if signed, could give Uber the option of purchasing Lime in two to four years and combining it with Uber's existing scooter business, called Jump. Scooter rentals have also been hit hard by the coronavirus, but companies have been gradually reintroducing scooters to city streets.
“Diversified ridesharing platforms such as Uber and Grab have been able to leverage delivery, bikesharing, and financial services to partially offset ridesharing revenue declines," added Asad Hussain, analyst at PitchBook. "We believe diversified platforms are better positioned to weather the storm in the near-to-medium term relative to more pure-play ridesharing platforms such as Lyft."
3. Profitability Goals
Like Lyft, Uber has responded to a drop in bookings by aggressively cutting expenses. Uber has undergone several rounds of layoffs since its IPO, and on Wednesday announced a more drastic layoff of 3,700 jobs, or 14% of its workforce. It's also continued to pull out of some markets where it doesn't believe it can dominate, having recently ended Uber Eats operations in several countries where it faced stiff competition.
Uber's original goal of turning a profit by the end of this year is now a distant memory. And it seems implicit in the company's recent statements that profitability is unlikely to happen this year. Like other firms, Uber withdrew its 2020 guidance for gross bookings, adjusted net revenue and adjusted EBITDA. Although it may not give specific financial guidance for the current quarter and rest of the year, management will likely offer detailed commentary on what steps Uber is taking to stem losses and ensure the durability of the business long term.