Here’s what analysts are watching
Uber CEO Dara Khosrowshahi speaks during a product launch event in San Francisco, California on September 26, 2019.
Philippe Pacheco | AFP via Getty Images
Uber will release its first-quarter results after the bell on Wednesday, and Wall Street’s notes to investors give some insight into what investors might expect.
The latest financial statements come after what appeared to be a difficult quarter for the company. Stocks are down more than 26% year-to-date as inflation defies consumers, the spread of the omicron variant of the coronavirus and soaring gasoline prices have weighed on the stock.
Here’s what Wall Street is watching for this quarter:
Are Uber riders coming back?
Uber probably bounced back from all the omicron runners’ dips. In a March filing with the SEC, Uber said mobility demand improved significantly during the month of February. Rides were 90% recovered from February 2019 levels. This led the company to increase its first quarter EBITDA guideline from $25 million mid-term to $130 million to $150 million , compared to 100 to 130 million dollars.
“Unlike most other internet subsectors, first-quarter ridesharing results are expected to be strong on the back of resilient mobility trends,” analysts at Alliance Bernstein said in an earnings preview. Investors will be watching for regional recovery trends as APAC growth has likely lagged an uptick in Covid. Its European market could also suffer an outsized impact from war and inflation, analysts said.
What is the impact of fuel prices on drivers?
As gas prices soared across the country due to the war in Ukraine, many drivers feared they would flee gig work in favor of other jobs. Some delivery and ride-sharing companies have struggled with supply and demand imbalances due to the pandemic, so additional pressure or a setback could have hampered finances.
For its part, Uber has implemented a temporary fuel surcharge. This is set to expire soon, so investors will be looking to see if this has kept drivers and if the company plans to extend the incentive. Gasoline prices averaged $4.19 a gallon on Monday, down from $2.9 a year ago, according to AAA data.
Still, a large proportion of drivers believe the surcharge was not enough and some analysts say the recovery in driver supply has slowed. “We believe driver supply and take rate risk is high, with our proprietary price tracking data indicating that ride prices and wait times were up in April compared to Q1,” Bank of America analysts said in a note.
Should Uber increase incentives?
As mobility grows, Uber may need to implement additional short-term driver incentives due to high gas prices and the need to rebalance supply and demand.
The company spent millions last year in an effort to bring drivers back as states eased Covid restrictions and vaccinations became widely available. But those incentives are weighing on its balance sheet, and investors have always been concerned about costly efforts to bring drivers back.
“For Q2, the risk is that Uber may need to add short-term driver incentives to adjust to the positive recovery in demand and gas prices,” Bank of America analysts wrote. . Still, the incentives might not be as costly as they were in 2021, analysts at Alliance Bernstein speculated.
How far can delivery go?
Uber’s delivery business had allowed the company to weather the headwinds of Covid when people started ordering more from home during the pandemic. In recent quarters, it has appeared that the segment, which includes its Uber Eats business, has continued to hold its own as food delivery has become part of everyday life.
But how long can delivery grow? “Following a slew of estimate cuts in the cohort of pandemic winners, the looming concern is that food delivery will miss the mark in the first quarter,” analysts at Alliance Bernstein said.
Uber said in the March filing that annualized delivery rate gross bookings hit a record high in February, meaning it may need to look elsewhere to expand.
“New customer additions are likely slowing, but we believe order frequency can still be a driver of growth,” analysts said.
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