Uber stock price has suffered a harsh reversal in the past few weeks, erasing billions of dollars in value. It has retreated by about 30% from the year-to-date high of $86.85, moving to its lowest level since August 6. This retreat has brought its market cap to over $129 billion, down from over $160 billion a few months ago.
Growing market leader
Uber Technologies has become one of the fastest-growing companies in corporate America. It is a disruptor that has gained substantial market share in the ride hailing and the food delivery industry.
Uber’s total annual revenue has risen from over $13 billion in 2019 to over $41 billion in the trailing twelve months (TTM). This growth has accelerated as more people are opting to not having vehicles, and are instead opting for ride hailing solutions.
Most importantly, Uber has broken even and started to make profits. It moved from an annual loss of over $9.1 billion in 2022 to a profit of $1.88 billion in the last financial year. Its trailing twelve-month (TTM) profit stood at over $4.4 billion.
The most recent financial results showed that the number of monthly active platform consumers rose by 13% to 161 million. Trips rose by 17% to 2.86 million, a sign that demand is rising.
Consequently, Uber’s total revenue jumped by 20% to $11.1 billion, while its net income was over $2.6 billion. Its adjusted EBITDA rose to over $1.6 billion, meaning that the company is now getting highly profitable.
Uber’s growth is happening across all its businesses. Its mobility division had gross bookings of $21 billion, a big increase from the $17.9 billion it had last year. Analysts believe that products like Tesla’s robotaxi will hurt this business, which I don’t believe.
Similarly, its delivery business had gross bookings of $18.6 billion and an adjusted EBITDA of $628 million. This is a big improvement since this is one of its toughest businesses.
Uber’s key challenge is in its freight business, which offers transport and freight solutions. Uber Freight had over $1.3 billion in revenue and a negative EBITDA of $19 million.
Uber’s growth and valuation
A key challenge for Uber is that analysts expect that its business will start slowing going forward. The average revenue estimate for the current quarter is a 18.4% growth to $11.7 billion.
Uber’s revenue for the first quarter is expected to be $11.8 billion, a 16% annualized growth. The annual revenue this year will be $43.7 billion, followed by $50.5 billion in the next financial year.
Still, one hope for Uber is that its goal for creating a super app will help to reinvigorate growth. One way is for the company to expand to the fintech industry, as some other ride-hailing companies have done. It can become a viable competitor to Cash App and Venmo.
Uber is also fairly valued since it has a forward P/E ratio of 21, which is lower than the S&P 500 average’s 20. It is also cheaper than other companies despite the fact that it is still seeing strong growth.
Uber stock price forecast
UBER chart by TradingView
The daily chart shows that the Uber share price has pulled back in the past few days. This retreat happened after it formed a double-top pattern at $82, and whose neckline was at $55.
The stock has dropped below the 50-day and 200-day moving averages, signaling that bears are in control. There is also a risk that it will form a death cross pattern, which happens when the two averages cross each other.
Oscillators like the Relative Strength Index (RSI) and the MACD indicators have all pointed downwards.
Therefore, the stock will likely continue falling as sellers target the neckline at $55. A drop below that level will point to it falling to the support at $40.3, its lowest swing on October 26.
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