Uber Technologies, Inc. (UBER) reported its first-quarter results on May 8. The company failed to beat the consensus EPS estimate, but its revenue came above Wall Street estimates. In this piece, I have discussed why waiting for an opportune entry point in the stock could be prudent.

For the first quarter, analysts expected an EPS of $0.22, but UBER reported a loss per share of $0.31. On the other hand, its revenue came 0.4% above Wall Street estimates. The ride-hailing app’s Monthly Active Platform Consumers (MAPCs) rose 15% year-over-year to 149 million. Also, its gross bookings increased 20% over the prior-year quarter to $37.65 billion. Its gross bookings came below estimates of $37.93 billion.

For the second quarter, UBER expects gross bookings of between $38.75 billion and $40.25 billion, representing a growth of 18% to 23% year over year on a constant currency basis. It expects adjusted EBITDA of $1.45 billion to $1.53 billion, representing a growth of 58% to 67% year over year.

UBER’s stock has declined 9.6% over the past month and gained 77.9% over the past year, closing the last trading session at $67.93.

Here’s what could influence UBER’s performance in the upcoming months:

Recent Developments

A new Minneapolis ordinance significantly increasing rideshare driver pay will cause UBER to cease operations in the city on May 1. Beginning May 1, the new ordinance will set a citywide pay floor for rideshare drivers: $1.40 per mile and 51 cents per minute.

Mixed Financials

UBER’s revenue for the first quarter ended March 31, 2024, increased 14.8% year-over-year to $10.13 billion. Its income from operations came in at $172 million, compared to a loss from operations of $262 million in the prior-year quarter. The company’s adjusted EBITDA rose 81.6% year-over-year to $1.38 billion.

In addition, its net cash provided by operating activities increased 133.7% year-over-year to $1.42 billion. Also, its free cash flow rose 147.5% over the prior-year quarter to $1.36 billion.

On the other hand, its net loss attributable to UBER widened 316.6% year-over-year to $654 million. Its net loss per share attributable to UBER common stockholders widened 300% year-over-year to $0.32.

Commenting on its last quarter’s performance, CEO Dara Khosrowshahi said, “Our results this quarter once again demonstrate our ability to deliver consistent, profitable growth at scale. More than 7 million people now choose to earn flexibly on Uber every month, with driver earnings of $16.6 billion continuing to grow faster than our topline.”

Favorable Analyst Estimates

Analysts expect UBER’s EPS for fiscal 2024 and 2025 to increase 8.8% and 119.7% year-over-year to $0.95 and $2.08, respectively. Its fiscal 2024 and 2025 revenue are expected to grow 16% and 15.9% year-over-year to $43.23 billion and $50.11 billion, respectively.

For the quarter ending June 30, 2024, UBER’s EPS and revenue are expected to increase 73.5% and 14.6% year-over-year to $0.31 and $10.58 billion, respectively.

Stretched Valuation

In terms of forward EV/Sales, UBER’s 3.44x is 87.7% higher than the 1.83x industry average. Its 36.51x forward non-GAAP P/E is 92.1% higher than the 19.01x industry average. Likewise, its 9.93x forward Price/Book is 274.5% higher than the 2.65x industry average.

Mixed Profitability

UBER’s 14.97% trailing-12-month Return on Common Equity is 20.8% higher than the 12.40% industry average. Furthermore, the stock’s 32.36% trailing-12-month gross profit margin is 4.9% higher than the 30.85% industry average. Also, its 8.64% trailing-12-month levered FCF margin is 29.7% higher than the 6.66% industry average.

Conversely, UBER’s 3.60% trailing-12-month net income margin is 38.6% lower than the 5.87%. Furthermore, the stock’s 6.10% trailing-12-month EBITDA margin is 55.7% lower than the 13.76%.

Mixed Historical Growth

UBER’s revenue grew at a CAGR of 52.9% and 26.8% over the past three and five years, respectively. Its total assets grew at a CAGR of 4.6% over the past three years.

Conversely, UBER’s Tang Book Value contracted at a CAGR of 34.4% over the past three years.

POWR Ratings Reflect Uncertainty

UBER has an overall rating of C, equating to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. UBER has a C grade for Stability, which is in sync with its 1.39 beta.

UBER's D grade for Value is consistent with its stretched valuation. Its mixed historical growth justifies its C grade for Growth.

UBER is ranked #50 out of 78 stocks in the Technology – Services industry. Click here to access UBER’s Momentum, Sentiment, and Quality.

Bottom Line

2023 marked UBER’s first profitable year since going public in 2019, but it began 2024 by posting an unexpected net loss. However, the net loss had nothing to do with its operating business, as mobility and delivery demand remained healthy. The company witnessed weaker ride demand in some parts of the world as its investments lost value during the previous quarter.

UBER is seeing solid audience and frequency growth, but pricing remains flat. It has seen its legal costs mount as it faces legal battles with regulators related to the classification of its drivers. Increasing regulatory troubles could continue to affect its profitability. Moreover, any regulation changes could force it to raise prices, affecting demand.

Given its mixed financials, historical growth, stability, and profitability, it could be wise to wait for a better entry point in the stock.

How Does Uber Technologies, Inc. (UBER) Stack Up Against Its Peers?

UBER has an overall POWR Rating of C, equating to a Neutral rating. You may check out these A and B-rated stocks within the Technology – Services industry: Leidos Holdings, Inc. (LDOS), LiveRamp Holdings, Inc. (RAMP), and Zoom Video Communications, Inc. (ZM). For exploring more Buy-rated Technology - Services stocks, click here.

What To Do Next?

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UBER shares rose $0.07 (+0.10%) in premarket trading Friday. Year-to-date, UBER has gained 10.33%, versus a 9.78% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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