Uber, the ride-hailing and food delivery company, announced its Q2 earnings for 2023, revealing its first-ever profitable quarter. However, despite this significant milestone, the stock market is not responding favorably. Why is Uber’s stock set for its biggest loss in months, despite the positive news?
Uber Achieves First-Ever Profitable Quarter
After years of losses, Uber has finally turned a profit. The company reported $326 million in operating income for the three-month period ending June 30, 2023. Additionally, Uber’s quarterly free cash flow of $1.1 billion was the best in its history.
Disappointing Revenue Growth
Despite the significant milestone of turning a profit, Uber’s Q2 2023 revenue growth was only 14% year-over-year, the weakest since Q1 2021. Furthermore, the company’s $9.2 billion in revenue came short of consensus estimates.
Stock Market Loses Confidence
Despite the positive news of Uber’s first-ever profitable quarter, the stock market is not responding favorably. Uber’s stock price initially rallied as much as 4% in pre-market trading, but quickly turned negative after the market opened, sliding as much as 6%. This would have been the company’s worst day since October 11, 2022, before recovering to a milder 4% loss, which is its steepest since March.
Concerns About Slowing Sales
One possible reason for the stock market’s lack of confidence in Uber’s earnings report is concerns about slowing sales. Uber’s 14% year-over-year revenue growth is significantly lower than the 24% growth reported in Q1 2023. Additionally, the company’s revenue from ride-hailing services was up only 10% year-over-year, while its food delivery revenue grew by 29%.
Long-Term Targets and Competitors
Despite the current dip in stock price, analysts remain optimistic about Uber’s future. The company’s management set a target of $5 billion in adjusted earnings before interest, depreciation, and amortization for 2024, nearly 300% growth from its $1.7 billion adjusted EBITDA last year. Additionally, ride-hailing competitor Lyft and food delivery rival DoorDash will report their earnings soon, providing insight into the overall industry performance.
Conclusion:
Uber’s first-ever profitable quarter is a significant milestone for the company after years of losses.
However, the disappointing revenue growth and concerns about slowing sales have led to a lack of confidence in the stock market. Nonetheless, analysts remain optimistic about Uber’s long-term targets and the industry’s overall performance. As competitors report their earnings, it will become clearer whether Uber’s earnings report is an outlier or indicative of larger industry trends.