4 Nov

Uber Stock: 3Q Earnings Today, Lockup Expires on Wednesday

WRITTEN BY Mike Sonnenberg

While the market seems to be positive today with S&P 500 (SPY) opening at a record high, investors in Uber stock (UBER) are anxious before the company’s third-quarter earnings. Analysts expect the revenues to be around $3.7 billion. The losses will likely be $1.44 billion. On a per-share basis, the loss comes to 83 cents.

Analysts are largely bullish on the stock with the target price of $48.73, which points to about 60% potential upside. Among the 38 analysts surveyed by Reuters, 24 recommend a “buy,” 13 recommend a “hold,” and one recommends a “sell.” The stock has fallen 2.6% at 11:04 AM ET, while Lyft (LYFT) has risen 0.5%.

What to watch in Uber’s earnings

Investors in Uber stock should watch the company’s revenue growth. Uber went public with a promise of revenue growth. However, the company’s growth has been slow. In the second quarter, Uber’s revenues only grew 14%.

Investors should look at Uber’s revenues-to-gross-bookings ratio. The ratio fell from 22.5% in the second quarter of fiscal 2018 to 20.3% in the last quarter. The fall might indicate that Uber is losing its grip on drivers.

Uber charges drivers a certain percentage for every booking. While the gross bookings metric relates to the trip fare, revenues only focus on what the company receives. A falling revenue-to-gross bookings ratio might mean that the company is getting a lower share of the trip fare from drivers. The lower share might be due to changing regulations in the ride-sharing business. Apart from regulatory issues, Uber faces backlash from drivers.

Being a loss-making company, the market will also look at the extent of Uber’s losses. Last week, Lyft stock rose due to narrower-than-expected losses. Uber investors are hoping for the same outcome.

Will Uber stock take a hit from lockup expiration?

While earnings are important, the expiration of the lockup period on Wednesday could have a bigger impact on Uber stock. On Wednesday, early investors and employees holding the stock could flock to the market to sell the stock for the first time.

Beyond Meat (BYND), another startup that went public in May, saw its lockup period expire last week. The expiry coincided with the company’s earnings. Beyond Meat stock fell more than 20% on October 29. Jim Cramer, CNBC’s Mad Money host, thinks that Uber’s lockup expiration “could hobble the entire market.”

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