Uber stock surges despite big second-quarter loss on positive trends

Uber stock surges despite big second-quarter loss on positive trends

Uber’s efforts to merge its game-changing ride-hailing service with food and cargo deliveries showed progress last quarter, though the company suffered a huge loss driven by a sharp drop in its external investments.

Looking ahead to Uber’s $2.6 billion second-quarter loss announced Tuesday, Wall Street celebrated a significant milestone that raised hopes that Uber is on the verge of becoming a self-sustaining company.

The good news came Tuesday in the form of a key metric known as free cash flow. Uber generated $382 million in cash from April through June, the first non-bleeding quarter in the company’s 13-year history.

Uber has now been profitable for four straight quarters on a financial metric called EBIDTA, or “adjusted earnings before interest, taxes, depreciation and amortization.”

As a result of the move, Uber earned $364 million in the second quarter, beating industry analysts’ forecasts of $277 million, according to FactSet Research.

Uber still suffered a massive loss, coming in at $1.33 per share, mostly due to the decline in Uber’s stake in Aurora, a self-driving car company, and a Singapore-based transportation service called Grab.

CEO Dara Khosrowshahi said Tuesday he’s confident the company will build on its momentum and potentially surpass a previously set goal of generating $1 billion in free cash flow annually.

Khosrowshahi said he now believes Uber is at its strongest position since he was hired as the company’s top executive almost five years ago. Khosrowshahi took over after co-founder Travis Kalanick was forced out of the company amid a series of scandals ranging from allegations of sexual harassment and cover-ups to allegations of stealing technology for self-driving cars.

Shares in San Francisco-based Uber Technologies Inc. rose nearly 19% to close at $29.25 on Tuesday. The stock is still down 30% this year and well below its peak of around $64 reached early last year.

The downturn largely reflects continued skepticism about whether Uber will be able to continue charging high enough prices for rides and food delivery to make consistent money over the long term. For most of its history, Uber has been able to lure customers to its services with low prices, subsidized by the billions of dollars it raised from venture capitalists and other investors before becoming a public company in 2019.

Less than a year later, the pandemic struck and demand vanished as government lockdowns locked millions at home and people stopped driving.

Uber’s ride-hailing service has now surpassed its pre-pandemic levels, although Khosrowshahi told analysts on Tuesday that demand in several major U.S. cities like San Francisco, Los Angeles and Seattle, where large numbers of people continue to work remotely, is down is suppressed as before.

Elsewhere, passengers are returning to Uber in droves, seeming willing to pay for the higher fares the service is charging even as inflation soars.

Riders took a total of 1.87 billion Uber trips in spring and early summer, a 24% increase from the same time last year. That’s an average of around 21 million trips per day. The volume also surpassed the 1.68 billion passenger rides that Uber provided in the second quarter of 2019, before the pandemic turned everything upside down.

Wedbush Securities analyst Daniel Ives said the second quarter suggests Uber “can make profits while navigating inflationary pressures and driver shortages that persist in some cities.”

The surge in ridership helped Uber more than double its revenue from the same time last year to nearly $8.1 billion.

Uber’s higher rates and other incentives also make driving for the service a more attractive option. Drivers who work solely for ride-hailing now make about $37 an hour, while those who also spend some time delivering groceries.

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