Real Money Stock of the Day Uber shares fell 3.96% to $28.39 apiece Monday.
London's Transport for London Agency, or TFL, said the ride-sharing company wasn't doing enough to keep passengers safe. Uber saw its license suspended by the TFL in 2017 for similar issues and later came to an agreement with the agency to operate for 15 months in the major city.
Uber will appeal the decision, but if it does so unsuccessfully, it could lose a material amount of revenue.
Uber would lose roughly 3% to 4% of its ride-sharing revenue stream revenue stream by losing the London market, according to Wedbush Securities analyst Dan Ives. Uber is expected to see roughly $18.115 billion in total revenue in 2020, mostly comprised of ride-sharing revenue, although the company's Uber Eats and Freight businesses are growing. Such a percentage hit to 2020 revenue would equate to a bit less than $1 billion, which would still be enough to justify the slight down move on the stock of a company worth $50 billion by market cap.
It's no surprise the revenue hit would be of this magnitude, as Ives points out that London is Uber's largest city in Europe, home to 3.5 million riders. Losing the London market would be a "seismic blow" to Uber's Europe business. Europe usually accounts for about 10% of the company's total revenue.
More importantly, the ruling "will be an overhang on the stock in the near-term," Ives wrote in his note.
Uber is trying to prove to both U.S. and European regulators it can be compliant on a number of issues. Big tech investors are generally hoping to own stocks that can elude regulation, as several of the U.S.' largest and most dominant tech players are under government scrutiny for a number of concerns.
As for profitability, it's not yet clear how the London ruling impacts Uber. But without a major market, the ruling likely slightly reduces the size of future profits, even assuming the company removes costs associated with London operations.
Ives does note that Uber has some shot at successfully appealing the decision.
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