Uber hits record as investors look past rising losses for vaccine

Investors are suddenly bullish about Uber. The shares climbed more than 9% on Monday and were set to close above their IPO price of $ 45 for the first time since June 2019, the month after the company went public. .

The move comes despite last week’s third quarter earnings report showing a second straight quarter of declining revenue, another expected decline this period and a cumulative net loss of $ 5.8 billion for the year to date. now.

Monday’s rally came after drugmakers Pfizer and BioNTech reported their Covid-19 vaccine to be over 90% effective, prompting optimism that demand for consumer services like carpooling may soon come back into effect. The gains follow last week’s 34% jump, triggered by the passage of California’s Proposition 22, which will allow Uber to continue to classify its drivers as contractors instead of employees.

Lyft shares climbed 22% on Monday, following a 31% increase last week. However, while Uber’s stock erased its post-IPO losses and ultimately generated gains for investors, Lyft remains nearly 50% below its starting price last year.

The difference between the companies is the delivery of food. Uber partially offset the decline in its core ridesharing business this year with Uber Eats. The service saw gross bookings growth of 134% in the third quarter, while Uber’s ridesharing division fell 53%.

Still, the delivery business lost $ 183 million on an adjusted basis, following a deficit of $ 232 million in the second quarter. Richard Kramer, an analyst at Arete Research, told CNBC in August that Uber was likely to “slide into a net debt position” in the next quarter due to its rate of cash consumption.

Uber and its supporters believe the company’s profitability outlook is improving even with the challenges of the pandemic.

The negative margin for the delivery business fell to 16.1% in the third quarter from 26.2% in the second quarter and 59.4% in the first. At the same time, its positive adjusted carpool margin fell to 17.9% in the third quarter, from 6.3% in the previous period, but still down from 23.5% in the first three months of the year.

Consider these developments, then envision a not-too-distant future that includes open bars and restaurants, live events, and workers coming and going to the office, and there is at least a sane narrative for investors bet on the business.

“Ultimately, we see a revival of rides as ‘when’ not ‘if’ and now represents a source of spikes in 2021 if / when the massive availability of a vaccine can boost demand for social travel / carpooling “Guggenheim analysts wrote in a report Friday, ahead of the latest vaccine development update. They have a buy recommendation on the stock.

Canaccord Genuity analysts, who also have a buy rating, agree. They wrote last week that, “given recovery trends and a more optimistic outlook for Covid vaccines, it seems likely that Uber’s mobility business will show strong growth compared to easy comps by the end of the year. mid-2021, suggesting that the stock could start operating more decisively. “

However, if the economy is to reopen in a way that resembles the world before the pandemic, what does that mean for Uber Eats, which is growing rapidly because consumers do not eat out?

As Arete’s Kramer said in August, “You have people who go for walks to restaurants or stay at home and order take out, but you don’t tend to have both at the same time.”

Add it all up and Uber has yet to show that it can make money.

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