What Prompted Uber’s Drastic Layoffs?


Jul. 30 2019, Updated 12:29 p.m. ET

American ride-hailing company Uber Technologies (UBER) was down yesterday after it announced it laid off a third of its marketing team—around 400 employees from the 1,200-person team.

This drastic step was part of Uber’s attempts since its IPO in May to cut costs and streamline operations. To compare, the stock closed with a loss of 1.4% while the broader-market S&P 500 closed with a loss of 0.16%.

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Reason for the Uber layoff

The layoff, announced internally on Monday, is set to affect Uber offices around the world, The New York Times reported yesterday. It added that Uber said its large team was hampering decisionmaking—CNN reports management said it was leading to overlapping work, unclear decisions, and mediocre results. Since its IPO, Uber has been making a lot of changes to its leadership team to regain its edge. It combined its marketing, communications, and policy teams in June.

Ride-hailing rival Lyft (LYFT) closed 2.2% lower yesterday, and the stock has fallen 18.2% since its IPO in May. On August 7, it is set to release its second-quarter results.

Uber’s IPO in May

On May 9, the company went public and was listed on the NYSE under the “UBER” ticker and priced at $45. The stock fell 7.6% on its first trading day, but has risen 5.5% since then. CEO Dara Khosrowshahi blames ongoing trade tensions for the company’s stock price decline. The day Uber announced its IPO, Donald Trump announced tariffs and triggered the US-China trade war. Khosrowshahi feels the company got caught up in the market swirl. The company also feels its costly promotions to attract riders and drivers affected its first-quarter results.

Of the 33 analysts covering Uber stock, 16 recommend “buy,” five recommend “strong buy,” 11 recommend “hold,” and one recommends “sell.” Their target price of $52.13 for the stock implies a 19% upside from its current price.

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Market performance

On Monday, the SPDR Dow Jones Industrial Average ETF (DIA) closed 0.10% higher. It has returned 16.6% YTD (year-to-date). Meanwhile, the Invesco QQQ Trust ETF (QQQ), which tracks the Nasdaq Composite, has gained 20.5% YTD. On Monday, the ETF closed with a loss of 0.16%. The SPDR S&P 500 ETF (SPY), which closed with a 0.18% loss yesterday, has returned 20.6% YTD.

First-quarter results after the IPO

In its first quarter, Uber’s monthly active platform consumer count grew 33% YoY (year-over-year) to 90 million from 70 million, and its revenue rose 20% YoY to $3.0 million. However, Uber also reported an operating loss of $1.0 billion in the quarter.

The company is set to release its second-quarter results on August 8. Stay tuned to know how the company did.


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