Uber’s Reporting Earnings -- Two Reasons it Could Beat

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Uber Technologies, Inc.  (UBER) - Get Report reports earnings after the closing bell Thursday. The stock is depressed, and tailwinds are potentially at play. 

Before we get into the details and what analysts are saying, here are the expected results for the second quarter:

  • Revenue: $2.09B (-34% year-over-year)
  • Total Gross Bookings: $9.79B (-37%) 
  • Rides Gross Bookings: $3.62B (-70%)
  • Uber Eats Gross Bookings: $6.47B  (+91%)
  • EBITDA: -$853M (last year: -$656M) 
  • Adjusted Loss Per Share: -66 cents (last year: -$61 cents)

Ridesharing is obviously getting crushed by the pandemic, while food delivery, now even more of a growth business, is experiencing a tailwind. But revenue will still decline sharply, as ridesharing is 42% of net sales, while Eats is 35%. On profitability, the wider loss in dollar figures expected over last year’s Q2 loss is a near-term concern because revenue is lower. The net loss includes a -40% operating margin, compared to -20% last year, but investors expect the margin and profitability trajectory to resume moving in a positive direction when revenue begins to recover. 

But "With the economy starting to improve and set for some considerable tailwinds around travel and a post lockdown bounce back, the overall environment is starting to considerably improve for both Uber and Lyft over the coming quarters with 2Q marking a clear trough in volumes and fundamentals in our opinion,” wrote Dan Ives, Wedbush Securities analyst in a note. If investors see evidence of that trend in sight on the earnings print, downside to the stock may be limited. When Uber reported first quarter earnings in early May, trends for the second quarter were deteriorating but management did say that it was seeing positive trends in virus markets. The stock, for several reasons, soared after that earnings print. 

And if analysts have revised their rides estimates up for Q2, they haven’t done so by much, especially as the virus’ spread accelerated from mid-June onward. 

"Based on intra-quarter data points and our model sensitivity work, we think Street estimates for Q2 are reasonable, given the updated Q2 Rides and Eats Bookings guide,” wrote RBC Capital Markets analyst Mark Mahaney in a note. In that guidance, Uber said rides gross bookings had recently begun to track at a 60% decline year-over-year, a less-severe decline than what’s expected for the entire quarter. The company also said Eats gross bookings was tracking at a 100% pop, against analyst estimates for less than that for the entire quarter. 

Meanwhile, Grub Hub’s  (GRUB) - Get Report gross bookings were tracking around that growth rate, Ives noted. Ives said there is reason to "see upside to our estimates” to Eats gross bookings. Ives is looking for 100% growth in the metric for Uber. 

The stock is down 13% to $32 a share since June 8 and trading at just 3 times 2021 revenue. That’s a low valuation for a growth stock, especially one that is expected to maintain its long-term growth trajectory. Trading at 3 times next 12 months sales would even be slightly low to fair. 

The point: The set up for the stock into earnings looks decent, but if management emphasizes the outlook is murky, investor excitement may be kept at bay. 

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