The ride-hailing market has had a bumpy ride in 2020. Uber Technologies (NYSE:UBER) had its ups and downs, and the issues caused by the onset of the novel coronavirus will undoubtedly be reflected in the Aug. 6 second-quarter earnings release. What does this mean for Uber stock?
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It’s a big day for UBER shareholders as the stock seems to have hit an invisible ceiling and just can’t break through it. If there’s a positive earnings surprise, the bulls could have an excuse to take the share price to the next level.
However, the surprise might not come from the ride-hailing sector. It could actually stem from a market that Uber has diversified into, and which might be surprisingly lucrative during these economically challenging times.
A Closer Look at UBER Stock
As I alluded to earlier, Uber stock feels like it’s stuck. A year ago the share price broke above $46, but the bulls haven’t been able to bring the stock up to that level again.
The bulls did make a pretty good attempt in February of this year. That’s when UBER stock briefly attained the $41 level. At the time, it felt like $46 was just a few days away.
Unfortunately, it wasn’t meant to be. The global pandemic sent many stocks tumbling, and Uber was no exception. In March, Uber shares bottomed out at a gut-wrenching 52-week low of $13.71.
In hindsight, it would have been nice to have bought shares at that bargain price. Indeed, the bulls ran Uber stock all the way up to $37 in early June. Yet, that was another failed attempt to break through the invisible ceiling.
By the end of July, Uber shares were barely above $30. The bulls are undoubtedly hoping that the upcoming earnings announcement will lift their spirits along with the stock price.
What’s Expected From Earnings
The projections from the experts are evidently quite low for Uber’s second quarter. Apparently, the analyst community is only expecting $2.17 billion in revenues during that period. That would mark a 32% decline in revenues compared to the same quarter of the prior year.
Few experts are keeping their hopes up when it comes to Uber’s quarterly ride-hailing business. Thus, Uber’s second-quarter sales from rides are projected to drop by roughly 80%.
On top of that, despite a 14% jobs cut implemented by Uber, the company is predicted to lose 78 cents in quarterly earnings per share. Contrarians should actually view all of this as good news, though. It could be a beautiful setup for a pleasant earnings surprise based on dour expectations.
Could Uber Eats Deliver a Street Beat?
If you’re counting on ride-share profits to provide sufficient fuel for an earnings beat, don’t get your hopes up. There have apparently been estimates suggesting a 70% to 80% decline in the demand for rides between April and June of this year.
Thankfully, Uber had the forward-looking vision to diversify beyond ride hailing. Food delivery has been a hot market due to concerns about the safety of going out to eat at restaurants in 2020.
So, even if Uber’s ride-hailing revenues probably slid during the second quarter, the Uber Eats food-delivery service likely helped to fill the gap. The first-quarter results for Uber Eats told a powerful tale (the following are year-over-year changes):
- Gross bookings up 52%
- GAAP revenue up 53%
- Adjusted net revenue up 121%
The second quarter’s results could actually beat those numbers as food delivery was wildly popular during that time. Uber’s recent partnership, popular Chilean grocery-delivery start-up Cornershop, should only help to enhance Uber’s foray into this emerging niche market.
The Bottom Line
Will Uber Eats’ revenues be enough to make up for lost profits in the ride-hailing niche? Only time will tell, but an earnings-day breakout could galvanize the bulls to push Uber stock through its frustrating and long-standing ceiling.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.