Uber Technologies ( UBER ) is on the upswing ahead of its fourth-quarter results to be released before markets open Wednesday, with demand for its rides and deliveries up, fares higher and the number of drivers fully recovered from steep losses due to the pandemic.
The company is on track to post the first profitable year in its history based on adjusted EBITDA , a figure that excludes interest, taxes, depreciation and amortization, as well as significant expenses for Uber’s stock-based compensation. Three months ago, Uber projected fourth-quarter adjusted EBITDA of about $615 million. That would result in an annual profit of about $1.7 billion, compared with a loss of $774 million the previous year.
The market consensus is in line with that forecast, with an expected net loss of 16 cents per share based on the average analyst estimate tracked by Visible Alpha. (Net income includes expenses excluded from adjusted EBITDA as well as changes in the market value of Uber’s multibillion-dollar equity portfolio.)
Analysts expect revenue of $8.4 billion, up 46% year-over-year, thanks to the late 2021 acquisition, as well as a change in Uber’s business model in the U.K. In November, Uber projected fourth-quarter gross bookings of $30 billion to $31 billion, an increase of 23% to 27% from a year ago, adjusted for a headwind of 7 percentage points.
In the third quarter, total bookings were up 32% over the same period last year in constant currency and the number of trips on the platform was up 19% over the same period last year, helped by a 14% increase in monthly active users over the previous year. year earlier. “Underlying these numbers are several trends that represent tailwinds for us: urban opening, the travel boom and, more broadly, the continued shift in consumer spending from retail to services,” Uber CEO Dara Khosrowshahi said at the company’s third-quarter conference call. He added that strong demand persisted in October.
As of September, the number of active passengers in Uber’s mobile segment was up from three years earlier, before the COVID pandemic.
The number of drivers on the platform also completely reversed the pandemic decline.
“The bumpiest parts of the ride remain in the rearview mirror” for Uber and its surviving competitors as their growing scale boosts profitability and allows them to contain marketing costs, writes analyst MoffettNathanson, initiating coverage of Uber stock with an outperform rating and a $47. target share price last week.
As car prices have risen sharply since the pandemic began and higher interest rates make debt-financed purchases even less affordable, Uber and rival transportation providers will benefit, Piper Sandler analysts wrote a month ago when they upgraded the stock from neutral to overweight. The $33 target price the stock reached last week.
New car prices are up 18% over the past two years; used car prices are up 25% over the same period.
Uber’s third-quarter comment that the company had reached an “inflection point” for “expanding profitability in the coming quarters,” as well as rising investor expectations led to a 34% increase in the share price since the start of 2023, cutting the stock’s decline over the past year to 4.2% (see chart below).
Uber defines its acceptance rate as revenue as a percentage of gross bookings, which, in turn, is the total dollar value of rides and deliveries on its platform, including drivers’ earnings and incentives minus tips.
Thus, the percentage rate represents the share of receipts the company leaves after payment to its drivers.
Including this benefit and other accounting changes, Uber’s overall sales rate was 28.7% in the third quarter, and analysts expect that rate to remain above 27% in the fourth quarter and beyond. This is important because Uber is under pressure to increase driver revenue.
If passenger traffic and delivery demand remain high and low unemployment limits the number of drivers, the company may be forced to offer additional incentives to drivers.