Firms Like Uber and Yelp Are Still Staring at a Long Road to Recovery

Though some tech firms hit hard by the COVID-19 pandemic are seeing a bit of demand improvement, business is still generally well below February levels.
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Several tech companies that have seen business fall sharply during the last two months have rallied post-earnings this week. But that doesn’t necessarily mean their businesses are seeing major recoveries.

Uber  (UBER) - Get Report, which is up over 5% post-earnings today, is a good case in point. Though Uber reported that its ride-sharing business was down about 80% annually in April, markets were encouraged by the strong growth reported for the UberEats food-delivery business, as well as some of Uber's earnings call remarks about recent improvement in ride-sharing demand.

CEO Dara Khosrowshahi mentioned that Uber has seen week-on-week ride-sharing growth for the past three weeks, with 9% trip growth and 12% gross bookings growth seen last week. He added that in Georgia and Texas, which have begun to reopen from COVID-19 lockdowns, gross bookings are up 43% and 50%, respectively, from their lows.

However, such improvement doesn’t preclude ride-sharing activity from still being down sharply from pre-COVID levels -- for example, if ride-sharing in Texas fell 80% from its peak, a subsequent 50% increase would still leave it 70% below peak levels. And when asked on the call about where Georgia and Texas bookings stand relative to peak levels, Khosrowshahi and CFO Nelson Chai said that they didn’t have the numbers on hand.

Ride-sharing rival Lyft  (LYFT) - Get Report, which soared post-earnings on Thursday and is up another 3% on Friday, disclosed that its rides were down 75% annually in April. The company did add that rides grew 13% from the week ending April 5 to the week ending May 3, but also mentioned that last week’s annual decline was still above 70%.

Square  (SQ) - Get Report, whose software and payment-processing services are used by legions of small and mid-sized businesses, reported on Wednesday and rallied post-earnings in spite of reporting its seller gross payment volume (GPV) fell 39% annually in April, with GPV growth improving “modestly” during the second half of April relative to the first half.

Square did report strong transaction growth for its Cash App mobile payments platform (soaring Bitcoin transactions, which carry fairly low margins, played a role), and also that its online stores (e-commerce) GPV has risen more than five-fold in recent weeks. However, online stores GPV still accounts for a small percentage of total GPV.

Yelp  (YELP) - Get Report, which depends heavily on ad sales to local businesses and is up slightly post-earnings today, said that it estimates its April revenue was down about 35% annually. The company did add that it “began to see both traffic and advertiser budgets begin to stabilize” in California and New York during the second half of April, but also cautioned that revenue could fall further in May and June due to new ad budget changes and/or the impact of consumer activity on ad prices and budget fulfillment.

Online travel giant Booking Holdings  (BKNG) - Get Report, which is down a little over 1% post-earnings today, didn’t make much attempt to sugar-coat what it’s seeing. CEO Glenn Fogel disclosed that newly-booked hotel room nights were down over 85% in April, following a 60%-plus drop in March. And CFO Dave Goulden noted that reported room nights were negative in April, thanks to cancellations.

Goulden did say that the annual decline in newly-booked room nights has stabilized around April levels, and that Booking began seeing “some very early indications that domestic travel was starting to return in certain markets where shelter-in-place rules were relaxed,” such as China, South Korea and Germany, near the end of April. But he also observed that a very large percentage of April’s new bookings featured “flexible cancellation policies.”

“I must emphasize again that it's too early to say we're witnessing anything like a broad rebound in travel,” Goulden said. “Especially as we've seen some countries like Singapore, where travel demand was less impacted than other places initially, but is now seeing travel demand decreases associated with new outbreaks.”

Arguably, that type of caution about near-term business trends is also justified for companies such as Uber and Yelp, even if there has been a bit of demand stabilization or improvement in recent weeks.