Ride-Sharing Needs a Facelift

CEO of Uber (UBER) Dara Khosrowshahi earns 200X the salary of the median Uber employee and for that large sum of money, he lost the company $5.9 billion in just the first quarter.

The company is a perennial cash burner, and they haven’t shown us how they will fix this problem.  

The company can dish out as many “positive outlooks” as it wants, but rest assured, they usually just move the goalposts and put some lipstick on a pig to dress up even more astronomical losses coming down the pipeline.

Uber’s management obviously did a bad job messaging their “positive outlook” as the share price opened up down 11% in today’s trading.

The time has come to pay the bill for this company and it’s not pretty.

They didn’t come anywhere close to becoming profitable during generational low-interest rates, and now, their prospects look bleak as we barrel towards a world with vastly higher borrowing costs.

Sure, the revenue doubled, but drivers aren’t making any money with such high gas prices and Uber has had to shell out more for labor and that’s not coming down any time soon.

In fact, if there was one tech company that would perform awful in high inflationary conditions, this is the company.

Not only that, but Uber’s service now is also just way too expensive, take a ride, and they charge consumers way more than its worth.

Unless it's 2 in the morning and there is no means back home, consumers won’t rush to order an Uber unless it’s an emergency.

I expect a shortage of drivers to continue as working for Uber as a driver is really bottom-of-the-barrel type of stuff and why do it during a time where labor rights are on the rise?

Remember they had to present a ballot for voters to get them classified as subcontractors and spent $200 million on it.

Investors must have pondered if this $200 million would have been better invested in the actual business instead of ripping off their own employees.

The intensifying competition for labor is also revealing the different ways in which ride-hailing giants are tackling the issue. Uber said it has been making tweaks to the driver app, like unlocking the ability to see upfront fares before accepting a ride, improving maps, and removing bugs.

Uber management touts Uber Eats as the savior of its business but then this company should be valued as a food delivery company with a lower multiple.

Uber eats is still losing money with no end in sight and one must conclude that it appears as if this “tech” firm has no chance of ever becoming profitable based on this current business model.

I fully expect Uber eats to burn more cash as food inflation goes from bad to awful which will mean demand destruction of its customers.

These customers can easily substitute Uber eats services by ordering supermarket delivery and throwing a frozen pizza in the oven.

Uber eats service is a luxury, not a necessity as many Americans cut back on spending because of major economic policy mistakes by the US Central Bank and the current White House administration.

It’s not a shocker to fin

d out that in the 3 years of Uber’s stock being public, shares have gone down 35% since the IPO in dreamy financial conditions with unlimited investment appetite for inferior tech companies.

The stock currently trades at $26 per share, and I would say this stock would be a good short-term trade at around $17.

Lastly, Uber’s way of saying they are a good tech company is by describing themselves as “not Lyft” and that right there is a massive smokescreen.