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Tuesday, November 7

Uber Faces Volatility on Revenue Miss

Despite consistently becoming more efficient, the market just doesn't know how to value Uber right now.

Uber posted a massive earnings beat this morning, but a slight blemish on their revenue numbers has bears oiling into this morning's price action. What's going on? 

The headline here is that Uber is achieving consistent revenue growth while profits absolutely erupt as their higher-margin core mobility product continues to outperform delivery and other areas. At a high level, Uber put together a solid $0.10 EPS with $9.29 billion in revenue. The biggest highlight was a 20%  YoY increase in gross bookings. While margins continued to comfortably expand and beat analyst expectations, this is the second straight quarter where revenue came in slightly behind what The Street was hoping to see. That was enough to let bears take control in early trading.

As core mobility revenue continues to accelerate, Uber's delivery revenue is slowing drastically. Delivery revenue only grew 5% YoY and technically notched their 2-straight quarter of revenue declines. Meanwhile, the market is watching DoorDash pull off 27% revenue growth in Q3. Investors are starting to wonder if Uber is shifting focus to mobility because they're just losing ground in the delivery space. Investors initially assumed delivery revenue was slowing due to decreased post-pandemic demand, but 6-straight months of slowdowns is raising more and more alarm bells. Freight also continues to be a heavy loser with revenue declining 33% YoY, but that's a trend being experienced across the economy right now. 

Uber continues to prove that the efficiency model is actually working for them. Back in Q2, investors initially assumed Uber was touting AI as a way to simply brag about a temporary beat on profits. However, another quarter of expanding margins is starting to prove that Uber really has turned a corner when it comes to how well their algorithm saves costs and maps routes in a more and more optimized matter. All Uber needs to do now is assuage concerns about Uber Eats and the stock can keep pushing back to higher valuations. For now, those concerns are winning out in the price action with Uber declining 2% in early trading. 

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