Trading On margin

No signs of rising at this time by TipRanks


© Reuters. Uber: no signs of rising yet

Uber Technologies (NYSE 🙂 develops platforms that enable carpooling and food delivery independently. I am bearish on the stock. (See Uber stock charts on TipRanks)

C-Suite issues

Uber’s series of management issues persist. Sukumar Rathnam, the company’s chief engineering officer, is the latest in a series of executive departures since the start of the pandemic. Rathnam had been in office for just over a year before mounting tensions between management forced his departure.

Since listing as a public company, Uber has struggled to find the right mix in its C suite, which shocked investors and caused the share price to drop.

Fight for profitability

Uber managed to beat analyst expectations in its second quarter earnings report, with revenue of $ 167.18 million and EPS of $ 1.07. The business, however, remains unprofitable and concerns are growing.

Uber is still trading at an EV / EBITDA margin of -27.39%, while the industry is trading at a 13.41% margin. Of course, we can say that this is an improvement over its five-year average of -52.60%, but there is no sign of operational efficiency, total operating expenses ( 69.37%) still exceeding that of 2018 (66.78%).

Evaluation

We can always minimize the trajectory of profit margins of a growing company. Still, Uber’s growth metrics indicate it’s not growing fast enough to justify its share price.

Unlike price / revenue, the price / sales metric can be used at any stage of a business lifecycle. You generally want your PS ratio to be between 1.00 and 2.00 to justify the current share price; Uber has a ratio of 5.65, which is not only significantly higher than the benchmark, but also 255.29% higher than the industry average.

If we are to base the stock price on future cash flows, that means it is significantly overvalued. A good price-to-cash flow ratio is typically less than 15.00, but Uber’s forward ratio of 394.15 is a mile above it. In addition, at a negative free cash flow return (-3.63%), any future growth claims would be stale.

The Taking of Wall Street

Uber’s average price target is $ 68.52, up 72.38%.

Wall Street thinks the stock is a strong buy, with 23 buy ratings and 2 sustaining ratings. Then again, the stock has been highly rated since its IPO, but we have yet to see any notable gains. If you’re basing yourself on some basic hunch, you’ll rate the stock as a buy, but the data suggests otherwise. There are also events holding back the stock: C-suite and driver contract issues continue to play a big role, and Uber has a history of controversy. I’m not ready to bet against his cooling.

Disclosure: At the time of publication, Steve Gray Booyens does not have a position in any of the titles mentioned in this article.

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