- Uber’s stock is up 26% since November 3, 2020, from $35.77 to $44.87 per share
- The delivery business surges to 135% year-to-year growth
- Earnings: -$0.62 per share vs. -$0.65 expectation
Uber Technologies, Inc. (NYSE: UBER) released the third-quarter earnings report on Nov. 5, 2020. The financial results are for the company’s quarterly performance ended on Sep. 30, 2020. The shares of Uber had jumped nearly 14% on Nov. 4, 2020, before the earnings release the next day. The stock continued to gain momentum after the earnings announcement and reached a 26% increase as of November 6, 2020.
Here is the summary of Uber’s quarterly performance ended on September 30, 2020:
- Earnings: -$0.62 per share vs. -$0.65 expectation, 4.8%
- Revenue: $3.13 billion vs. $3.2 billion expectation, – 2.18%
The revenue declines 18% year-over-year because fewer people use the Uber App for taxi services during the pandemic. The Mobility Gross Booking drops 50%, while Delivery Gross Booking jumps 135%.
Consumer behavior changes dramatically during the “new normal.” People continue to conduct their activities while staying at home. As a result, the demand for delivery increases, and the need for mobility declines. The “new normal” shift the business model from going out to get food to get the meals to people’s doors.
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Uber manages to capitalize on the shift in consumer behavior to its mobile application. Uber has successfully diversified its market segment and enter a new market with the same technology. The revenue comes from Mobility, Delivery, and Freight. Here is the third-quarter performance from each market segment:
The revenue from the Mobility segment declines by 53% from the third quarter last year. Uber’s income from the Mobility segment is $1.36 billion in Q3 2020 vs. $2.89 billion in Q3 2019. The earnings drop from $631 million in Q3 2019 to $245 million in Q3 2020. It equals a 61% loss.
Uber applies a new set of safety policies to protect its drivers and passengers. The company launches a “No Mask, No Ride” campaign to minimize the spread of coronavirus.
The online taxi company updates its App to implement Mask Verification Technology. Both passengers and drivers must take a selfie with the mask on and verify before using its service. The company partners with Unilever, Clorox, SC Johnson, and Dettol to provide sanitizing equipment for their passenger and delivery drivers.
Uber acquired Routematch, a public transit software company with over 500 North American and Australian networks. The mission is to combine Uber service and public transport. The application works in 31 major cities that include Boston, Dallas, Chicago, and Sydney.
The company makes a significant investment in green mobility. Uber meets its climate change commitment by expanding the Uber Green service. The feature allows its rider to book electric or hybrid vehicles in 15 US and Canadian cities. Uber also partners with major electric carmaker to give an incentive for its drivers transitioning to an electric vehicle.
The company also launches Uber Rent that allows a customer to rent a car using Uber App. The pilot project has been done successfully in numerous countries. The program will be first launched in the UK.
The Delivery segment’s revenue increases from $645 million in Q3 2019 to $1.45 billion in Q3 2020. It equals 125%. The earning improves by 42%. The company reported a $316 million loss in Q3 2020 and a $183 million loss in Q4 2020. Uber Eats has grown significantly during the pandemic. The growth of new restaurant partnerships increases by 70% year-over-year.
The small and medium business (SMB) restaurant addition grows over 60% year-over-year. Uber Eats introduce QR codes for dine-in ordering in US restaurants. But, most online orders come from the website and Apps. Uber launches a nationwide “Tonight I’ll be Eating” advertising campaign in the US and Canada. The campaign gains positive results from Subway and Panera Bread.
Grocery becomes the primary revenue source as it exceeds $1 billion in annualized run-rate. The app offers service in 10 countries, including Canada, Australia, UK, Japan, and France. Uber partners with NimbleRx for prescription delivery. The program is being tested in Dallas and Seattle.
The freight business revenue increased by 32%. It earned $218 million in Q3 20219 and $288 million in Q4 2020. The net earnings improved by 10%. The unit reported an $81 million loss in Q3 2019 and a $73 million loss in Q3 2020.
Uber focuses on automation to improve operating efficiency, new shipper integration, and existing shipper engagement. Uber announces Uber Freight Enterprise. It allows the customers to place directly, control their loads, and connect them digitally to the carrier network.
Growth by Region
Uber has seen a significant increase in the Asia Pacific, Europe, Middle East, and Africa, ranging between 20% to 43%. While the US, Canada, and Latin Americans have shown a decline between 30% – 39%.
The shares of Uber gained 44.79% year-to-date. The growth was ahead of Lyft (NASDAQ: LYFT) with 30.58%, Nasdaq 100 with 36.24%, and the S&P 500 with 7.92%. However, Grubhub (NYSE: GRUB) outperforms its rivals and indexes at a 68.78% year-to-date gain. The company focuses on the food and beverage delivery business. It captures the consumer behavior shift during the pandemic, ahead of its competitors.
Uber outperformed its peers at the beginning of the year. But, the stock had the lowest dip at the Coronavirus pandemic height. Uber’s stock recovered between March and June 2020 after the announcement of the stimulus program. However, the stock dipped in July 2020 as demand for mobility cratered due to the economic lockdown worldwide.
On the other hand, Grubhub’s stock continued to accelerate. The business model is the opposite. Uber is the late starter in the delivery business. The riding app transition into the delivery business by updating the existing platform. The shares started to show an upward trend since mid-August.
Uber is still behind in the restaurant acquisition in comparison to Grubhub with years of ahead start. But, Uber has more diversified businesses that can be leveraged to compete in the delivery business. Grocery and pharmacy are another segment within the delivery market that Uber targets to be ahead of Grubhub. Uber can also compete in pricing, distance, as the company is building of freight network that can lower its cost.
Quantitative research and Lyft’s outlook for next week earnings
Uber has a Beta of 1.11 and an annualized Alpha of -15.79%. The target stock price is between $49 to $60 per share. Grubhub has a lower Beta (1.1) slightly, and higher Alpha (-9.99%). The company is ahead of Uber in the delivery business, which performs well during the pandemic.
Lyft, on the other hand, only focuses on the mobility business and does not indicate to enter the delivery market. This reflects in their stock return performance. Lyft is the lowest performer with a Beta of 1.63 and an Alpha of -86.16%.