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Regulatory Obstacles Mount for Uber: What Could be Next?
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A regional court in Germany prevented Uber (UBER - Free Report) from navigating around the nationwide Uber ban that has been imposed in the country since 2015. The ruling against Uber adds to the mounting regulatory obstacles the company must face.
Regulatory Obstacles Mount
Uber has tried to get around the ban by effectively acting as an intermediary between its users and professional car-hire companies or existing taxi fleets instead of its own network of independent drivers.
Today, the Frankfurt court ruled that Uber could no longer submit ride-hail requests received on its app to car-hire companies because it didn’t own a car-hire license itself, which is required in Germany. The regional court said Uber could appeal the decision but that it should suspend such services immediately.
An Uber spokesman, Tobias Fröhlich, said in a statement that the company “will assess the court’s ruling and determine next steps to ensure our services in Germany continues.” Uber shares didn’t react much to the announcement as they remained relatively flat as they closed down less than 0.1% on Thursday.
The regulatory setback in Germany comes about a month after Uber lost its license to operate in London. Regulators said they found widespread instances of unauthorized drivers using the platform to pick up patrons.
The company’s regulatory scrutiny paired with its whopping $1 billion loss it endured in its third quarter have sent the stock down over 27% since its early May IPO.
Uber Eats
Uber and its IPO class peers like Lyft (LYFT - Free Report) , Chewy (CHWY - Free Report) , and Pinterest (PINS - Free Report) have all struggled to gain any traction this year. Investors have also had additional concerns with Uber than just its regulatory obstacles.
Not only is uber facing obstacles to operate its business in certain international markets, but it is also running on a loss in many of its operations. Uber Eats lost around $316 million in adjusted EBITDA in Q3 2019, which was a steeper decline from the $189 million it lost in Q3 2018. Uber Freight’s losses widened to a loss of $81 million from a loss of $31 million adjusted EBITDA in the year ago quarter.
Despite the staggering losses Uber has seen in its food delivery business, it does hold some advantages over its competitors. Uber can leverage its large drivers force to reach more consumers and the company believes that it can outlast some of its competitors in the food delivery space.
Dara Khosrowshahi commented “Many of the start-ups in the food category have been trying to use cheap capital to buy their way to growth. But we've seen the capital is getting more expensive and can run dry.”
Bottom Line
Our Q4 Zacks consensus estimates call for earnings to come in at a loss of $0.69 per share and for net revenue to rise 33.3% to reach $4 billion. The 33% growth in revenue would outpace the 25% growth it saw in Q4 of fiscal 2018.
Peeking ahead to Q1 of fiscal 2020, our estimates forecast a top-line climb of 35.5% to $4.2 billion and for the firm’s bottom line to see a 72% increase to a loss of $0.63 per share. The projected top-line gain would be higher than the 20% growth it saw in Q1 of fiscal 2019.
The headwinds continue to pile onto Uber as it can’t seem to catch a break lately and has struggled to rise above its $45 IPO. Uber will have to clean up the staggering amount of losses it has endured in 2020 if it wishes to gain investors’ trust. The company has its work cut out for it, but it seems determined to put the work in necessary to turn things around.
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This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
Image: Bigstock
Regulatory Obstacles Mount for Uber: What Could be Next?
A regional court in Germany prevented Uber (UBER - Free Report) from navigating around the nationwide Uber ban that has been imposed in the country since 2015. The ruling against Uber adds to the mounting regulatory obstacles the company must face.
Regulatory Obstacles Mount
Uber has tried to get around the ban by effectively acting as an intermediary between its users and professional car-hire companies or existing taxi fleets instead of its own network of independent drivers.
Today, the Frankfurt court ruled that Uber could no longer submit ride-hail requests received on its app to car-hire companies because it didn’t own a car-hire license itself, which is required in Germany. The regional court said Uber could appeal the decision but that it should suspend such services immediately.
An Uber spokesman, Tobias Fröhlich, said in a statement that the company “will assess the court’s ruling and determine next steps to ensure our services in Germany continues.” Uber shares didn’t react much to the announcement as they remained relatively flat as they closed down less than 0.1% on Thursday.
The regulatory setback in Germany comes about a month after Uber lost its license to operate in London. Regulators said they found widespread instances of unauthorized drivers using the platform to pick up patrons.
The company’s regulatory scrutiny paired with its whopping $1 billion loss it endured in its third quarter have sent the stock down over 27% since its early May IPO.
Uber Eats
Uber and its IPO class peers like Lyft (LYFT - Free Report) , Chewy (CHWY - Free Report) , and Pinterest (PINS - Free Report) have all struggled to gain any traction this year. Investors have also had additional concerns with Uber than just its regulatory obstacles.
Not only is uber facing obstacles to operate its business in certain international markets, but it is also running on a loss in many of its operations. Uber Eats lost around $316 million in adjusted EBITDA in Q3 2019, which was a steeper decline from the $189 million it lost in Q3 2018. Uber Freight’s losses widened to a loss of $81 million from a loss of $31 million adjusted EBITDA in the year ago quarter.
Despite the staggering losses Uber has seen in its food delivery business, it does hold some advantages over its competitors. Uber can leverage its large drivers force to reach more consumers and the company believes that it can outlast some of its competitors in the food delivery space.
Dara Khosrowshahi commented “Many of the start-ups in the food category have been trying to use cheap capital to buy their way to growth. But we've seen the capital is getting more expensive and can run dry.”
Bottom Line
Our Q4 Zacks consensus estimates call for earnings to come in at a loss of $0.69 per share and for net revenue to rise 33.3% to reach $4 billion. The 33% growth in revenue would outpace the 25% growth it saw in Q4 of fiscal 2018.
Peeking ahead to Q1 of fiscal 2020, our estimates forecast a top-line climb of 35.5% to $4.2 billion and for the firm’s bottom line to see a 72% increase to a loss of $0.63 per share. The projected top-line gain would be higher than the 20% growth it saw in Q1 of fiscal 2019.
The headwinds continue to pile onto Uber as it can’t seem to catch a break lately and has struggled to rise above its $45 IPO. Uber will have to clean up the staggering amount of losses it has endured in 2020 if it wishes to gain investors’ trust. The company has its work cut out for it, but it seems determined to put the work in necessary to turn things around.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q3 2019, while the S&P 500 gained +39.6%, five of our strategies returned +51.8%, +57.5%, +96.9%, +119.0%, and even +158.9%.
This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.
See their latest picks free >>