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Can Investors Expect More of the Same in Uber's Q3 Earnings?

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Uber (UBER - Free Report) is set to report its third quarter results on Monday, November 4, after the closing bell. The company has had a rocky start, struggling to gain any traction since its IPO in early May. Investors remain speculative about the efficiency of the company’s business model and its potential to become profitable.

Uber continues to run on a loss as it vigorously competes for market share with its main ride sharing competitor Lyft (LYFT - Free Report) . Let’s take a closer look at how the company’s been doing lately and how they might report this earnings season.

Uber Struggles Since IPO

Since its IPO, the ride sharing giant has been trying to figure out its path to profitability. In an effort to cut expenses, Uber elected to lay off hundreds of employees.

Uber has let approximately 350 employees go in the latest round of cuts, or roughly 1% of the company's total head count. The affected workers span various departments including Uber Eats, recruiting, and Advanced Technologies Group.

This latest round of cuts isn’t the only time that that the young company has had to lay off a portion of its work force. Uber laid off 400 employees from its marketing division in July, or about a third of that department. That was followed by another 435 unlucky workers in September, representing around 8% of its product and engineering teams.

This was also the first time that the Advanced Technologies Group, which is tasked with developing autonomous vehicles, was affected. The development of autonomous vehicles is critical for Uber to eventually become profitable, which is why the cut was alarming to some.

Outlook

Until autonomous vehicles are fully launched and implemented in the company’s business model, Uber must continue to hold a large work force of drivers to operate. The company has been widely criticized for the treatment of its drivers, which the company considers ‘contractors,’ because of the lack of benefits and low pay. In response to the outcry from its drivers, Uber launched Uber Money, a debit account for its drivers that they can use for everyday use.

These no-monthly-fee accounts can be used as soon as drivers register through the company's app, and are powered by Green Dot (GDOT), which has worked with Uber for years. At the core of the service is the ability for drivers to deposit their Uber earnings into those accounts immediately as many times a day as they want to, and have access to those funds at once. Uber debit card users will also get 3% cash back on gas purchases, while top-tier drivers will get 6%.

The new perk is helpful for drivers who rely on Uber for at least part of their living. Uber announced that it eventually expects the debit accounts/cards to help the company's drivers get 10% more value out of the money they earn on the platform.

Takeaway

Uber continues to make the adjustments it believes can take the business to the next level. The company’s newly launched effort to provide better perks for its drivers is a step in the right direction as it will need to keep its workforce for the time being.

Uber is a company that continues to innovate different ways to better establish itself as not just a ridesharing service, but as a tech giant. Our Q3 consensus estimates forecast Uber to report a loss of $0.83 per share and bring in $3.75 billion in revenue. Uber sits at a Zacks Rank #3 (Hold).

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