Uber stock is in a bear market; will earnings change that?

Uber Technologies (NYSE: UBER) stock price has moved into a deep bear market, falling by over 28% from its highest point this year and erasing most of the gains made earlier on. It has collapsed to its lowest point since January 2024 as the focus shifts to its upcoming earnings.

Uber is still growing

Uber Technologies, the pioneering ride-hailing company, has done well in the past few years despite rising competition in the industry. Like Google, its name has become a verb as it continued to gain market share in key countries. 

Subsequently, Uber’s annual revenue has more than doubled from 2019 when it made $13 billion. Its revenues soared to over $37 billion in 2023 and over $38 billion in the trailing twelve months (TTM).

The company has achieved that by expanding its business in the food delivery industry, where it has become a major player. Most importantly, Uber has transitioned from a cash-burning company into a highly profitable company that made a $1.8 billion profit in 2023.

Recently, however, the company has come under pressure as investors predict intense competition from Tesla when it launches its robotaxis. Some analysts also caution that Uber’s business could be disrupted by flying car companies like Joby Aviation and Archer Aviation.

Tesla’s robotaxi service will use the company’s advanced technology to help people hail rides in key cities. Tesla owners can also enrol their vehicles to the service and earn money just as many people do with Airbnbs. 

In a recent note, Elon Musk has predicted that the business would be worth over $5 trillion while the number of vehicles will be over 7 million. These are exaggerations since Tesla has around 2.2 million vehicles on US roads. 

I believe that the fully self-driving ambition will take time to work and that Uber will continue being a major player in the transport industry. 

As for flying cars, I also don’t believe that it will be a big industry as many analysts expect. And if it becomes a big industry, Uber is already involved in the industry through its investment in Joby Aviation. Uber has also launched Elevate, a product that will build skyports. 

Uber has made several important announcements lately. It has partnered with BYD, the giant EV company, and with Klarna, the fast-growing BNPL platform.

Uber earnings ahead

The next important Uber news will come out next week when the company publishes its financial results. 

Before we look at what to expect, let us review how Uber did it in the first quarter. The numbers showed that its gross bookings rose by 21% in Q1 to over $37.7 billion, helped by its mobility business which had $18.7 billio, and delivery which had $17.7 billion.

Revenue soared by 10% to $10.1 billion. Still, the company made a net loss of over $654 million, mostly because of the revaluation of its equity investments. Its monthly users soared by over 10 million people to 140 million. 

Analysts believe that Uber Technologies business continued thriving in the second quarter, with its revenue expected to be $10.57 billion. Uber made over $9.5 billion in the same quarter in 2023. Its adjusted EBITDA is expected to be between $1.45 billion and $1.53 billion. 

These numbers will likely show that Uber’s business is growing as more people turn to ride hailing for their mobility solutions. For the year, Uber’s revenue is expected to be $43.2 billion followed by $5o billion next year.

Valuation concerns about Uber

A key concern about Uber is that it has become a grossly overvalued company since its market cap peaked at over $140 billion this year, a figure that has come down to $123 billion today. 

To a large extent, there are signs that Uber’s business is overvalued because its forward price-to-earnings ratio stands at 65.6. In other words, all factors constant, it would take an Uber buyer 65 years to recoup their funds.

However, analysts justify this valuation on the fact that Uber is still seeing a double-digit growth rate and has started to turn a profit. In the future, Uber’s peak net profit margin will be between 10% and 15%, meaning that its profits at $60 billion will be $9 billion. Such a figure would still make it highly overvalued. 

While Uber is still gaining market share, it operates in a highly competitive industry. In most cities, Uber drivers also rely on other apps like Bolt and Lyft. These issues could limit the company’s growth in the future.

Uber stock price analysis

The daily chart reveals that the Uber share price has slumped hard after peaking at $82.20 earlier this year. It recently dropped below the key support level at $62.8, its lowest point in July this year.

The stock has moved below the 50-day and 200-day Exponential Moving Averages (EMA), meaning that bears are still in control. It is also hovering at the 38.2% Fibonacci Retracement point while the Relative Strength Index (RSI) and the MACD indicators have pointed downwards. 

Therefore, there are two scenarios to watch after earnings. First, and my base case, is that Uber shares will bounce back if it releases a strong report. Besides, investors are highly pessimistic about the company. Second, the stock could continue falling as sellers target the 50% retracement point at $50. 

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