I'll admit that I bought a few shares of Uber (UBER) for a trade on May 10th. I never thought of that entry as an investment. My thinking was that I could catch a ride on the backs of momentum bots when they kicked in. They never showed. I owned those shares less than a week, lost a few bucks. Never looked back. Foolish purchase? Yes. Excellent out? You bet.
Uber reported third quarter results on Monday night. Revenue grew by 32.7%. Whoop-de-darn-doo. Not only did the top line fall short of expectations. So did the bottom line. Badly. UBER posted EPS of $-0.68 versus expectations of $-0.54. Gross bookings, though up 29%, also failed to meet what Wall Street was looking for. Monthly active platform consumers expanded yet again, this time 26% to 103 million. Is more business good business? Good question.
The scariest number that the firm put to the tape on Monday night was the net loss of $1.16 billion, a loss that expanded 18% from the $986 million posted for the comparable quarter last year. Adjusted EBITDA? That line printed at $-585 million, which expanded 28% from the $-458 million for Q3 2018. Those investors still clinging to optimism will point to the dramatic sequential improvement from this year's second quarter when UBER put a net loss of $5.24 billion to the tape. In fairness there was $3.9 billion worth of stock based compensation expenses wrapped up in that number, and $401 million in stock based compensation expenses wrapped up in last night's data.
Extra Extra !!
Did you happen to hear CEO Dara Khosrowshahi speak about the firm's thoughts regarding the year 2021? "In terms of our 2021 targets, we will... these are targets at this point and we haven't given formal guidance for 2021, but I will tell you that this will.... we believe that we will be in a position to deliver very strong both top line and bottom line growth." Khosrowshahi mentions scale and efficiency while hinting at EBITDA profitability the year after next, but I heard the comments. I did not just read them, and at least to me, the CEO did not sound as confident as he reads. That could just be me, but that is my opinion. The CEO added... "We're excited about the consolidated EBITDA profitability target that we have out there. And we hope that we've shown you that we can execute against not just delivering top line growth, but also top line growth with discipline."
UBER remains a strictly speculative play for investors. The firm has close to $12 billion worth of cash and cash equivalents on the balance sheet, as well as another $10.4 billion in investments, so they are going to be here. These positions dwarf the aggregation of current liabilities, long-term liabilities and long-term debt. The firm will in my opinion, should be able to ride out a number of tough years even if 2021 does not turn out to be all that rosy. That said, the competition for this business is robust.
I do not want to own the shares. I probably do not want to buy the shares this year. I definitely do not want to buy the shares today. Investors need to be cognizant of the fact that UBER's IPO lockup expiration date is November 6th. Yes, that's this Wednesday. Tomorrow. Expectations are that 763 million shares will be become eligible for sale in the secondary market. Now, you may recall that these shares were originally priced at $45 per. What does that mean? Maybe not everyone comes to market. Maybe some folks add. The entire float will not be for sale, but volatility is nearly guaranteed.
Investors will note that the lows of early October are being tested on Tuesday morning. Resistance showed up exactly where it should have in mid-September. Relative Strength is weak, but not yet technically oversold. The daily MACD is currently sending a short-term sell signal. All of that to me means, that for those who believe in this name, today is not your day.
Trade Idea (minimal lots)
- Purchase one UBER $28 November 8th put for roughly $0.80. Except for size, this is precisely what I have done in this name. In my opinion, the risk reward is there. If the shares do not sell off hard around the lock-up expiration, the trader is out $80. The break even price for the equity would be $27.20 by this Friday. Small risk. Possible reward.