Is it time to buy the stock of Uber (UBER) ? This morning the stock was down 6% on the news that it may lose London. That market is gigantic for Uber, with 45,000 drivers and an immense amount of revenue. The Transport for London, the regulatory body, found 14,000 drivers who were basically impersonators. That, and a lack of insurance, are the main reasons for being kicked out.
I know 14,000 impersonations sounds like a ton, but that's not anywhere near a percent of the rides that Uber took part in. Plus, there have been no recent incidents as Uber has solved the problem with technology and the insurance canard is solved, too. So Uber will appeal. Tony West, the savvy general counsel, will make the case, and in the interim Uber still will be available, pending resolution. It's not a slam dunk. The Transport for London tends to protect what amounts to a guild of drivers -- they aren't like in New York where the medallion drivers seem to have no pull. But it is by no means open and shut, which is one reason why the stock almost immediately bounced back.
But the second, more important, reason why it bounced back? We are far enough away from the lock-up expiration -- the largest ever, by the way -- that there's no longer a lot of stock sloshing around that can hurt new shareholders. We can never be sure how many unlocked shares traded hands, but it's been a month since some 750 million shares became free to trade and it sure looks put away.
Not long ago, after initially botching Lyft (LYFT) and then telling you to dump it, we said it was time to wade back in, and it's had an almost 10% move.
We said to wait until we saw what would happen to the lock-up expiration, and we are now safely behind it.
We don't want to get too aggressive. The company, itself, continues to see things that it did wrong.
But what we heard from the company in the last quarter was a commitment to discipline that puts it in sync with the public companies and takes it out of the realm of the over-priced private companies.
Specifically, Uber talked on its call about willing to get out of losing markets of which Uber Eats might be responsible for a big part of the losses that Uber is still enduring; 15% of the Uber Eats markets are responsible for 50% of the unit's losses.
That's pretty incredible and it makes for a case that if Uber were to drop out of those markets -- and it is worth doing -- you could see a big jump in the stock.
Uber Eats is being crushed, like everyone else, by DoorDash, which seems to have unlimited funding to lose money. If Uber were to combine Eats, say, with Postmates or, even better, GrubHub (GRUB) , you might see the stock explode higher.
I think either that market gets rationalized the way the driver market seems to be doing with lots of dropouts of late, then an actual investment case on discounted cash flow or earnings before interest, taxes, depreciation and amortization can be made for Uber out in 2021. That's soon enough once the calendar changes.
Uber has caught two upgrades in the last couple of weeks. One said Uber could double if it blinks on food.
I know there is tremendous skepticism here. Heck, we have disliked it from day one, only really being enamored of Uber Freight, the trucking ride share business that has done a lot to lower the cost of freight.
Now, though, I think management is almost done playing defense. The overhang's behind it. Uber can go higher from here and it's time to do some buying.