Uber’s stock (UBER) is (rightly) in full meltdown mode.
Shares of the ride-hailing and food delivery company tanked nearly 7% on Monday just a day after a 6.8% beating following a disappointing second quarter earnings release. At $37.42, the stock is well below its May 10 IPO price of $45 and off its $41.57 closing price on its first day of trading.
The latest blood-letting in the stock looks to be in large part fueled by worries about Uber’s path to profitability. To be sure, Uber’s second quarter did nothing to alleviate those concerns — if anything it amplified them to a whole new level.
“The quarter was a gut punch to the bulls — Uber failed to give investors a path to profitability,” Wedbush analyst Dan Ives, who rates Uber stock at a Buy, said in a phone interview. “There is a lot of pressure on Dara [CEO Dara Khosrowshahi].”
Uber badly whiffed on analysts' top and bottom line estimates, and reported a massive $5 billion loss. Misses were also notched in Uber’s closely watched gross bookings and adjusted revenue figures.
Ride-sharing and Uber Eats sales growth slowed relative to the year-to-date average in the second quarter.
Another big risk for Uber
Not helping matters was Khosrowshahi’s flippant attitude on the need for Uber to reach profitability sooner rather than later.
“I think that there's a meme around which is can Uber ever be profitable? I certainly heard that meme along with others,” Khosroshowhi said to an analyst’s not so thinly veiled question on profitability on the earnings call.
Adds Ives, “It’s getting hard to believe in the Uber story — it lacks Wall Street credibility.”
Ives points to another near-term risk to Uber: the expiration of the IPO lockup period on November 6.
Unless Uber shows a material step change in its financial performance in the third quarter, early investors may use the lockup period expiration to dump the stock aggressively into year end. That would place a fresh round of selling pressure on a stock that could conceivably be sharply lower between now and November 6.
“Investors are fearing a tidal-wave of selling on the horizon [pertaining to the lockup expiration,” Ives explains.