How bad will it get at Uber (UBER) ? A billion here. Another half-billion there. The company is losing money at an historic rate. Fortunately, they've also raised quite a bit of money and sit with over $12 billion in cash on the books. Furthermore, a big chunk of the company's losses come in the form of stock-based comp hits rather than cash flow hits. That's not to say UberEats didn't disappoint this quarter, but it also didn't weigh on the bottom line quite as much as expected. I'd call that a draw.
Management did indicate Uber would hit profitability a year earlier than expected. Normally, I'd be inclined to take that projection with a big grain of salt, a huge grain of salt, maybe all the salt, but we're hearing similar things come out of Lyft (LYFT) . On the ride-share side, the two show similar metrics, albeit Lyft appears a bit stronger, but lacks the international reach and "other segment." Some may view that as a positive since the company can be more focused, but others may prefer the possible bigger growth opportunities and diversity Uber brings. Of course, those diverse offerings have weighed on the bottom line.
Uber did lose less money than expected. The loss of $0.68 per share was $0.13 ahead of the estimates while revenue of $3.81 billion exceeded expectations of $3.69 billion. That clocked in at a 30% growth rate year-over-year. Additionally, EBITDA of negative $585 million came in roughly $250 million better than expectations. It's almost impossible to believe that a loss of more than a half-billion was a quarter-billion BETTER than expectations. Uber benefited from stronger than expected adjusted net revenue growth. It's this growth, along with cutting costs, leaning on its large business moat, and the expected turn higher to profitability in UberEats that have bullish analysts more bullish on Tuesday. That's not to say there aren't bears out there. Susquehanna is out with a $31 price target on the stock, but there are plenty more in the $40 to $55 range, well above the current $29 price tag.
I'm not ready to jump on the bull train, but I do believe we'll get a bit of a limit to the downside after today. Granted there isn't much technical support to lean on here, but there is still a decent premium to consider a bullish put spread that is out of the money or even just a put sale if you are willing to own the stock.
Sell to open November 29 $26-$22 put spread at $0.60
Net Credit $60
Max Risk $340
Max Reward $60
Days until expiration: 24
I would actually consider taking the stock long at that cost basis. Maybe the long put isn't needed, but it will minimalize margin costs for the position. Also, we'll get a few holidays dabbled in here, so there aren't as many trading days until expiration as one might think. Thanksgiving is the day before expiration, so that entire week after Monday will likely be slow. I expect premium decay to heat up.
My other consideration would be to buy 1x November 29 $27 put and sell 2x November 29 $25 puts for no net cost entry. That puts a breakeven at $23 with $200 upside down to $25 and profitability between $23 and $27 with no non-commission loss above $27. As I type that one out and examine it more, I do kinda like it as well. Here are the optics on this one.
Buy to open 1x November 29 $27 put
Sell to open 2x November 29 $25 puts
Net Cost $0
Max Risk $2300
Max Reward $200
Days until expiration: 24
I'm going to watch the action for another hour or two as I weigh which of these strategies to pursue.