Uber (NYSE: UBER) stock has declined by about 24% since it debuted in May 2019, amid significantly slowing revenue growth and mounting losses. In this analysis, we break down some of the key factors driving the company’s valuation and outline a scenario (shown in Blue), which could see the stock fall by close to 50% from current levels.
View our interactive dashboard analysis Could Uber Stock Fall By 50% From Current Levels?
Uber’s Stock Is Down By 24% Since IPO
Why Has Uber’s Stock Declined Since Its Debut?
Uber’s Ride-Sharing Revenues Have Stagnated In Recent Quarters
Revenues for the ride-sharing business have stagnated, on account of a lower take-rate, although gross bookings have been trending higher.
- Gross bookings refer to the total fare charged to customers.
- Take rate refers to the percentage of Gross bookings retained by Uber after driver earnings, incentives, promos, and refunds.
- Net revenues are the revenues recognized by Uber.
Contribution Margins Have Trended Lower, To About 8% In Q2’19 Versus 15% A Year Ago
- Contribution margins – which are a gross margin-like measure, accounting for profits after direct costs, have declined from 15% in Q2’18 to 8% in Q2’19, due to higher costs and sluggish net revenue growth.
What Is Driving Uber’s Valuation And What Could Be The Downside if The Company Continues To Miss Growth Targets?
Ride-Sharing Gross Bookings: Assuming Marginally Lower Monthly Active Platform Customers & Revenues Per Trip In Downside Scenario
Monthly Active Platform Customer refers to the unique consumers for ride sharing (and Uber Eats) in a given month. Annual figures used above refer to the Q4 average for the given year.
Ride-Sharing Net Revenues: Assuming The Decline In Take Rate Continues Over 2020 Due To Competitive Pressures
- If the intense competition in the ride-sharing market forces Uber to continue its promotions for customers and incentives for drivers, its take rate could suffer.
Under Our Downside Case, Total Revenue Growth For 2020 Would Slow To 16%, Versus A Consensus Growth Rate Of Over 30%
The Significantly Slower Growth Could Cause P/S Multiple To Fall From 3x To 2x, Causing Price Estimate To Decline To $18
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