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Uber Stretches Profitability Target to 2021 Amid Coronavirus

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Uber Technologies’ (UBER - Free Report) profitability target has been affected by the coronavirus crisis. The company now expects to reap profits on an adjusted EBITDA basis in 2021 against its previous expectation of becoming profitable by the fourth quarter of 2020.

Large-scale stay-at-home orders across the United States and lockdowns in other nations weighed significantly on Uber’s ride volumes, as evidenced by the 5% decline in gross bookings from rides in the first quarter. This was the first time ever that gross bookings from rides decreased. Moreover, revenues from the segment witnessed muted growth of only 2% in the period compared with its usual double-digit rise in other quarters. With Uber generating the bulk of its revenues from this avenue, the downturn in the rides business is having a grave impact on the company’s overall performance.

It is important to note that the company’s aim to become profitable sometime in 2021 is in line with its initial profitability goal. Uber, which started trading on May 10, 2019, struggled with significant cost pressure, thanks to its excessive spending on sales and marketing. Aiming for profitability, the company reduced its spendthrift ways in the second half of 2019. In November, it announced expectations of achieving profits on an adjusted basis by the end of 2021. With a consistent focus on financial discipline and subsequent reduction in adjusted losses, this target was moved up to the fourth quarter of 2020 this February. However, the coronavirus dashed all hopes and the company had to go back to its initial profitability goal.

Shares of Uber have lost more than 9% since the beginning of February due to coronavirus-related setbacks compared with the industry’s 0.7% decline.

Price Performance Since February



 

Zacks Rank & Key Picks

Uber currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same space are Sohu.Com (SOHU - Free Report) , Shopify (SHOP - Free Report) and 21Vianet Group (VNET - Free Report) . While Sohu.Com sports a Zacks Rank #1 (Strong Buy), Shopify and 21Vianet carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Shopify and 21Vianet have surged more than 100% in a year. Meanwhile, Sohu.Com has a stellar earnings history, having trumped the Zacks Consensus Estimate in the preceding four quarters, the average positive surprise being 27.7%.

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