Uber Technologies (UBER) is a global company that is transforming the ride-sharing and meal delivery markets. After a much-hyped debut on May 10, 2019, Uber stock is one of the most watched IPO stocks today, but is Uber a buy right now in the current stock market rally?
Uber Stock Fundamental Analysis: Lack Of Profitability
Uber is in the midst of a dramatic turnaround, as the company fights to turn a profit. In 2018, Uber had earnings of 59 cents per share, but the profit was temporary. The company lost $5.04 a share in 2019, as the company continues to burn through cash. For 2020, the company is expected to lose $3.87 a share, according to IBD data.
On Feb. 10, Uber reported mixed Q4 results, falling short on revenue targets. The company narrowed its loss to 54 cents per share on sales of $3.2 billion.
According to the IBD Stock Checkup, Uber stock has a modest 47 out of a highest-possible 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
On Nov. 4, Uber and rival Lyft (LYFT) won a huge battle, with California voters approving Proposition 22, a ballot measure that would preserve the business model of the ride-share companies.
Proposition 22 will roll back California’s controversial AB5 labor law, which went into effect in January. The legislation mandates that companies reclassify many independent contractors as full-time employees.
But Prop. 22 would exempt ride-sharing and delivery companies from AB5. It would also establish pay requirements for drivers and other benefits such as sick leave and unemployment compensation.
“The underlying business models for Uber and Lyft were hanging in the balance if Prop. 22 did not pass in California to keep the contractor model,” Wedbush Securities analyst Daniel Ives wrote in a note to investors.
He added the vote was a “landmark victory” for Lyft and Uber stock, which derive a significant portion of their revenue from the Golden State. “This removes a significant overhang and dark cloud for the likes of Uber and Lyft,” Ives wrote.
On Feb. 2, Uber announced it would buy Drizly, an alcohol-delivery service for $1.1 billion in stock and cash. “Wherever you want to go and whatever you need to get, our goal at Uber is to make people’s lives a little bit easier,” said Uber CEO Dara Khosrowshahi. “That’s why we’ve been branching into new categories like groceries, prescriptions and, now, alcohol.”
Uber Posts Record Gross Bookings
On April 12, Uber on Monday reported record gross bookings for March, signaling a pickup in demand for its ride-hailing business. The company reported an annualized run rate of $30 billion, up 9% from the previous month.
“As vaccination rates increase in the United States, we are observing that consumer demand for Mobility is recovering faster than driver availability, and consumer demand for Delivery continues to exceed courier availability,” the company said. “We continue to believe that Uber is on track to reach quarterly adjusted EBITDA profitability in 2021.”
Is Uber Stock A Buy Or Sell Right Now?
Uber stock is forming a new base with a 6415 buy point, so the stock isn’t a buy right now. Shares are about 7% away from the correct buy point in the current stock market rally.
The stock’s relative strength line hit new highs recently, a sign of solid stock market outperformance.
Uber stock jumped 3% Monday and is about 7% off its 52-week high. Shares are back above their 50-day line.
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Uber Stock Competitors: Lyft
Competitors include rival ride-sharing company Lyft. Lyft stock is about 38% above a cup with handle’s 41.51 buy point following a Dec. 2 breakout.
Lyft stock surged after the company issued its Q4 earnings report on Feb. 9. The ride-hailing company posted a loss of 58 cents a share on revenue of $570 million. Wall Street analysts expected the ride-sharing firm to announce a loss of 71 cents a share on revenue of $553.85 million.
Despite Uber’s long-term potential and improving stock price, the company’s current fundamentals leave a great deal to be desired for growth investors. Still, the stock’s recent strength cannot be ignored.
For more leading stocks and stocks approaching correct buy points, check out these IBD Stock Lists, like the Stocks Near A Buy Zone. To see the current stock market trend, check out IBD’s signature daily analysis, The Big Picture.
Follow Lehtonen on Twitter at @IBD_SLehtonen for more on stock market analysis and insight.
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