Last March, I wrote a deep dive analysis on Uber and its ability to turn a profit this year. Despite the coronavirus causing the company to cut back operations nation-wide with declines of up to 80% in ride-sharing volume, Uber is receiving analyst upgrades based on the company’s variable cost structure. These analyst upgrades come despite slowing growth and $7 billion in debt on the balance sheet. Notably, the company has been continually unprofitable with record-setting adjusted net losses of $4 billion in 2019.
Looking at the numbers, we see the situation is far less optimistic. Uber’s revenue in the fourth quarter of 2019 grew 37% to $4.07 billion. However, it reported a net loss of -$1.1 billion compared to a net loss of -$887 million in the same period last year. EPS was negative -$0.49 compared to -$0.52 expected.
Further, full-year 2019 revenue grew 26% to $14.1 billion and net loss was -$8.5 billion compared to a net profit of $997 million for 2018. Stock-based compensation was $4.6 billion in 2019 for a net loss of $4.1 billion and adjusted EBITDA of negative -$2.73 billion.
Uber investors are encouraged by the non-GAAP Rides Adjusted EBITDA metric, which breaks out the profitability of Uber’s ridesharing business separate from Uber Eats and other bets, such as autonomous vehicles. Uber reported a 281% increase in Rides Adjusted EBITDA from $195 million to $742 million in Q4 and a 34% increase from $1.54 billion to $2.07 billion in full year 2019. The company’s overall EBITDA margin is -57.58% compared to the sector median of 12.99%.
I’ve been critical of the ride-sharing business model since pre-IPO when the media speculated Uber would reach $100 per share. The problem with the ridesharing business model is that the more money the business makes, the more the business loses. This is reflected in the past three years of financials between 2017-2019. Essentially, Uber and Lyft used private funding to subsidize rideshare demand in the year leading up to their public filings.
And this business model hasn’t really changed.
In a recent call, Khosrowshahi stated the company has $10 billion in unrestricted cash, yet the CEO also stated the company could lose up to $6 billion from the Coronavirus quarantines. I believe Uber will need to raise more money in the near future and will do (and say) whatever necessary to raise its market cap before doing so.
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