Should I buy uber stock, full analysis

Should I buy uber stock, full analysis
Uber stock were falling sharply after their IPO and at that time I felt like uber did have a lot of feature potential but I also felt like the valuation was still too high for me to be buying the stock and I was also worried about future competition as well well at that time the stock was trading for around thirty seven dollars a share and ever since  
much lower Nowadays. 

Now the question is raised that should I
buy uber stock or not.
So after reading this article, you get clear about your doubts.

 I first talked about uber stock and as a result. if my thoughts or my feelings have changed now that the stock price is a lot lower if I'm actually willing to buy uber stock now so in today's Post we're gonna take a quick look at the stock and the valuation will quickly run through their earnings and the IPO expiration and I'll also give you my updated thoughts on their future potential and whether or not I'm buying into the stock myself we got a lot to cover today I hope you guys enjoy this let's just jump right into this and let's start by taking a look at the stock and the valuation.

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okay well as you can see here the stock dropped a bit after their IPO before recovering to reach a record high of 47 dollars a share but later proceeded to falling off a cliff losing almost half of their value all the way down to a record low of $25 a share which they literally just hit today I'll be honest with you guys I actually had an order in to buy a very small amount of shares at anything less than $25 but for better or worse the stock never actually hit those levels and is now trading for almost $27 a shares so I may have missed the boat there.
but we'll talk more about that later in the video in any case uber is not currently profitable so we can't really look at a p/e ratio at this time but what we can do is take a look at their sales and use that to get some kind of an idea of where this stock is trading in relation to the market


Analysis of uber stock In Yahoo Finance metrics

 I usually use Yahoo Finance metrics because. I believe they update them daily and at the time of this recording they give Ober a trailing PS ratio of three point five six while seeking alpha gives the sector median a trailing PS ratio of about one point eleven which leaves over at about two hundred and twenty one percent higher than the sector median for comparison lift is more expensive at this time despite being much less diversified the number.

but then again another unprofitable company that is aiming to compete in the right hailing market is Tesla although they were actually profitable this last quarter but anyway I think that they're a much better company with a lot more future potential and they actually trade significantly cheaper than both goober and lyft and that's even despite the fact 

Uber stock has been crashing while Tesla stock has actually soared by almost 40 percent in just the past three months alone of course there's nothing stopping me from owning multiple different kind of specs dogs but if I was to only choose one I would definitely go with Tesla / uber at this time now to be fair to any uber bulls out there the company is actually growing at very high rates and so there is reason to believe that they will eventually grow into that valuation for example they've grown their sales from less than four billion dollars in 2016 to over eleven billion dollars last year and that's expected to continue growing by 24% this year and then accelerate to 31% growth the year after where they will top 18 billion dollars in revenue if my math is correct that would bring their PS ratio down to around 2.5 which is definitely not the worst that I've seen out there.

Considering the high growth still a bit rich though in any case the real concern with uber has thus far been profitability and if we take a look at net income we can see that they were actually positive last year but that was because they sold their businesses in Southeast Asia and Russia so it's not actually a fundamental profit from their underlying business and according to Yahoo Finance they're trailing 12 months actually saw them lose over eight billion dollars which is obviously a huge amount of money to be losing granted this is a company in its early stages of growth so investments are going to be very high along with cost

You know they're also paying huge amounts of money in stock based compensation likely tied to the IPO but they're still pretty deep in the red and that's obviously not sustainable anyway now that we're more caught up with the stock and the valuation and their yearly performance let's take a quick look at their earnings that caused the stock to drop by about ten percent that day and then also the IPO lock-up expiration that kept the stock falling into today and then we'll wrap everything up with my final thoughts at the end okay

the stock basically started to tank and after I was trading when earnings came out and by closing time the day after it had fallen by about ten percent but the crazy thing is that I actually thought those earnings looked pretty good now they did lose one point sixteen billion dollars which is even higher than the nine hundred and eighty six million dollars that they lost the year prior but I think it's also important to note that close to a third of those losses were from stock based compensation and despite the heavy losses they were still able to beat expectations on both EPS and revenue by a pretty wide margin with adjusted sales increasing by thirty five percent year-over-year which is also much higher than previous quarters although the third quarter is usually the strongest for them still the real issue continues to be profitability and as you can see on this chart here there was really only one quarter where they saw a positive net income and again that had nothing to do with their actual business so this is really a company that loses around a billion dollars or more every single quarter.

They did comments on this briefly saying that they expect adjusted profitability for the full year of 2021 which by the way lift only expects to be profitable in the last quarter of that year and their business is much more focused in ubers so if Berk an actually achieve this then it would be very impressive of course we still have to wait and see if they can actually deliver.

But as for now they're not ready to give any specifics on how they'll actually achieve this but I think it's a reason for optimism nonetheless keep in mind that while most of their businesses do lose a ton of money their rides business which is also their largest is actually profitable but before we run through those numbers let's just quickly run through each segment and I'll give my quick opinion on each and their future potential okay first up here is rides and that's obviously the biggest and most well-known part of their business where customers use the uber app to get a ride from one place to another


What is future potential of uber stock

I do think that there is a lot of future potential here given that just in the United States alone the right Hayley market is expected to grow to over 75 billion dollars by 2023 and according to the second measure as recently as September Luber was commanding almost 70% of the ride-sharing market in the United States with lyft being a pretty distant second at less than 30 percent while both are pretty much running and unchecked duopoly in the market of course my concern is that eventually they'll have to compete with the likes of Tesla Google's way Moe and possibly even Apple if they ever unveil what they're actually working on but those are giants companies with incredibly strong brands so the market might get a bit saturated over time

I'm not saying that uber can't remain the market leader but I'm just saying that it might not be as easy as everyone is expecting fortunately for uber though their dominance doesn't just stop in the United States back when the IPO they were claiming to have over 65 percent market share in areas like North America Latin 

America Europe and Australia while also controlling over 50 percent market share in places like India the Middle East and North Africa as well and even in areas where uber was basically forced to exit out of they were still able to negotiate minority stakes and rivals that operate in China Southeast Asia and even Russia and then there's a breach which they launched back in 2015 and that works in a similar way to traditional uber except that it's used for ordering food without having to actually drive to the restaurant yourself.

And this is another area where I see a lot of future potential given that just a few years ago grocery spending was actually surpassed by eating and drinking establishments for what I believe was the first time in history basically meaning that as depressing as this might sound more people are becoming either too lazy or perhaps more realistically they're just becoming too busy to actually be able to cook food themselves which is kind of sad and are therefore opting for purchasing already prepared food instead and that could lead to a bright future for businesses involved in online food delivery well it just so happens that uber eats is a major competitor

In this market as well now this one isn't as rosy as the rides business as there's already a lot of competition to compete with like doordash and GrubHub both of which commend more market share than uber eats at around 34 percent and 30 percent market share respectively while uber eats lags behind at only 20 percent themselves not to mention that Amazon is even investing heavily in grocery delivery which we know is another area that uber is hoping to compete in again not saying that uber can't be a market leader here.

but I just think that there might be some serious competition that investors should obviously be aware of anyway after that we have smaller segments like uber freights there are other bets and they're autonomous and other technology segments and uber freights connects shippers with carriers in the growing logistics markets other bets is testing other methods of transportation like electric bites and scooters that could potentially be big like overseas.

I would imagine but they're also working on uber works that is similar to Ober Freight except that it connects workers with employers and then the last segment that we have here is all the work that Ober is doing to develop their own autonomous fleet of vehicles and even aircraft and have their own kind of system going.

And while I do think that it's important for uber to eventually have some kind of a Robo taxi service given that some Manos project the market to be worth trillions of dollars in the future and because it costs over a lot of money to actually pay human drivers who by the way aren't even paid much to begin with and are usually protesting like they're you know on a pretty regular basis for better worker rights which is an issue that I have no idea how Ober is gonna solve other than to I guess charge more money to customers which would obviously hurt their market share.

But I'm also worried that Tesla and Google's way Moe will be much further along in autonomous technology than them so again uber may have a ton of potential here but I still think that there are some reasons to be cautious now taking a look at the performance of these segments here's a screenshot of the revenues but I'll just convert these into year-over-year growth rates so that it's easier to see and despite being the market leader rides was still able to grow their sales by 23% in the quarter which is very impressive uber eats grew even more at over a hundred percent freights grew by almost eighty percent and other bets grew by over a thousand percent as well.

And of course the reason why they're grown by so much is because uber is investing so heavily in these different areas and unfortunately that continues to be a drag on profits as rides is currently their only business that is profitable and they've actually been profitable for a while now at least in the past seven quarters if not more but that's just kind of what is shown here with positive 631 million dollars of adjusted eBay this last quarter however those other segments continue to lose more and more money as time goes on which isn't exactly a great sign especially their uber eats business that lost about half of what their rides business brought in but what's costing them.

the most money is their administrative and platform research and development costs that lost even more than what their entire rides business brought in so they're obviously going to need to find a way to cut costs in the future if they want to reach that profitability by 2021 now one last thing that I'll just quickly touch on here before we wrap everything up and I give my final thoughts is the IPO lock-up expiration that sent the stock dropping to a new record low today and that was because out of the 1.7 billion shares outstanding about 1 billion shares were previously locked and those became available to sell.


Some word for uber stock to buy or not buy

leaving about 90% of the stock available for trading according to CNBC now a lot of people were expecting the stock to crash a lot harder today and I think the reason it kind of stabilized a little and recovered you know kind of towards the end there was because over half of these locked up shares were actually purchased above $32 a share meaning that a huge percentage of those investors are actually in the red right now so selling that this time would probably not make a lot of sense if they actually believed in the company long-term still as this article from barons points out.

there was around 91 million uber shares traded at midday for an average of around $26 a share which is the second largest amount since their IPO and the daily average is usually only around 11 million shares by comparison so clearly there was a lot of selling pressure from those institutional investors who were previously locked up but as far as how I personally feel well like I mentioned before this is a stock.

 I was willing to buy at less than $25 a share it didn't quite get that low but I'm still willing to buy it if I can get it like in the little twenties or maybe even if it drops lower than that because at that point I do feel like it would give me a wider margin of safety now if you're asking well why do you want it so low well the reason is because I just don't really have a big necessity to be buying uber stock at this time if you really think about it.

I was someone who really believed in uber as a company over the long term and I felt like they could remain the market leader in the right sharing markets and possibly become a market leader or at least a very serious competitor in several other markets that they're also trying to compete in and especially internationally where there's a lot of growth opportunities then this absolutely looks like a buying opportunity to me cuz.

when I look at those quarter earnings they actually looked pretty good to me they beat on both EPS and revenue yes they did lose a ton of money but uber always is a lot of money I don't know who was expecting them to be profitable that's gonna take a lot of time until they're profitable but in terms of everything else everything looked pretty good and the Wrights business continues to be profitable which tells me that they can actually make their other businesses profitable too given enough time so for me.

 I see a lot of potential through brand I think they're kind of headed in the right direction but I'm cautiously optimistic because I think that there are still some risks out there and I think some of the markets that they compete in will become pretty heavily saturated in the future 

so I'm cautiously optimistic on uber but for me personally my portfolio is already very growth oriented and lately I've been trying to pick up more dividend stocks it's just kind of a personal thing for me I've been trying to pick up more dividend growth stocks I've also been focusing more on really solid companies with you know really solid balance sheets and that have a lot of profitability because I do feel like we're pretty deep into this economic expansion.


Conclusion of this post to buy uber stock

And I think some of those things are gonna start to matter the further we go on so those are the like I'm trying to add more of those companies into my portfolio to kind of balance everything out and uber doesn't really fit that.
If this question will be asked to me that should I buy the uber stockRight now I still just think it's just too expensive for me it's just not a thought that I want to buy at this time so anyway that's just purse how I feel let me know what you guys think down in the comment section below. 
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13 November 2019 at 15:53 ×

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