After announcing its first-quarter financials, Uber’s (UBER) share price fell 4.75% on Wednesday afternoon. Even as the macro environment for transportation services, including Uber and other taxi and delivery companies, is improving amid massive COVID-19 vaccinations, and economies and tourism, particularly, are recovering, several challenges threaten their profits.
3 Tiny Stocks Primed to Explode
The world's greatest investor — Warren Buffett — has a simple formula for making big money in the markets. He buys up valuable assets when they are very cheap. For stock market investors that means buying up cheap small cap stocks like these with huge upside potential.
We've set up an alert service to help smart investors take full advantage of the small cap stocks primed for big returns.
Click here for full details and to join for free
Sponsored
This quarter Uber posted its record low loss at -$ 0.06, which was significantly lower than analyst estimates of -$ 0.54 loss, with results worse than the -$ 0.54 loss of the next quarter and higher than the -$ 1.70 loss of 2020.
Prior quarter losses of $ 968 million were reduced to $ 108 million in the second quarter. Among others, this resulted from the sale of Uber Advanced Technologies Group’s (ATG) self-driving car division to Aurora. Overall revenue for the first quarter of 2018 was $ 2.9 billion, down 18% year-over-year and 10% year-over-year below Wall Street’s average of $ 3.29 billion.
Despite, if Uber (UBER) had not paid out 600 million in benefits to its UK drivers, its revenues might have been higher by $ 3.5 billion, surpassing estimates by $ 3.5 billion. A decades-long Supreme Court dispute with authorities that upheld the decision that UK Uber drivers must be retrained as employees, paying full benefits, concluded in Uber’s favour.
In some countries, making employees retrained could cause issues with the international company Uber, preventing it from making a profit.
According to US Labor Secretary Marty Walsh, many workers in this industry should be classified as full-time employees. So, shares of Uber, Lyft, and other delivery companies fell sharply last week.
During the report, Tony West, Uber’s general counsel, commented that the company hopes to develop a dialogue with Biden’s labour department, which he believes may “wean us from our current situation.”
Uber was hurt by losses incurred due to the pandemic due to a decline in taxi demand. This was another factor that hindered the app’s revenues and profits. A previous Uber announcement stated that the company would spend $250 million on bonuses and incentives to attract drivers back to its platform.
There have been higher prices and longer waiting times for Uber in some US cities due to the shortage of drivers. The first quarter of this year contributed to a partial recovery of travel demand, but gross orders in the industry are still 38% lower than the same period last year. During the first quarter, Uber’s monthly active users fell 5% to 98 million, less than the 100 million Wall Street expected.
Uber Eats – the delivery service that includes both medicine deliveries and grocery deliveries – has tripled its sales from last year and soared 28% from the previous quarter to $ 1.7 billion.
Nevertheless, the company is also under threat in this business. The reason for this high commission rate has been the subject of discussion with regulators who are looking for ways to help restaurateurs suffering from a pandemic. The pandemic prompted some major cities to consider enforcing these fees on a continued basis.
Hence, although Uber (UBER) has hinted at a possibility of profitability this quarter, rather than the original forecasts of “late 2021,” the company is faced with numerous threats. In the past 12 months, Uber shares are up 82% but have gained less than 1% since the beginning of 2021.
