So am I understanding you're saying that even in their best performing division where they drastically underpay they are losing $22m a quarter and this is good news? I am honestly asking, as I'm not super familiar with their finances.
2) A way to start understanding this is to understand the benchmark comparison for public market equities is Price to Earnings (PE) ratio.
3) Trying to judge an unprofitable company and develop a P/E that you can then resolve against other similar profitable companies requires one to look at trends, not absolutes. Uber substantially improved that single metric - $22m - YOY while still scaling. If you believe that trend will continue over time, they have a going concern in their core business. Do that for every line item and you can fudge a forward P/E.
4) incidentally the IPO “roadshow” is where the company goes around to institutional investors and bankers (who then communicate w their high net worth retail investors) and tell the story of the trend and roadmap to building a high value sustainable biz.
5) A decent article primer about the current market, why investors are ok w/low or no profit, etc is here -> https://theweek.com/articles/835726/reason-many-unprofitable...
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Because the market is insane.
Uber has yet to prove that their core business can actually make money. A large part of the appeal of Uber is that they're cheap, nobody has proved that customers are willing to pay enough for an Uber for them to turn a profit.
I'm legitimately surprised that they're _still_ not making profit on ride sharing. I just kind of assumed that the insanity had stopped. Running at a loss to gain marketshare is a fine and reasonable strategy if you think you actually have a plan to make money later, so far Uber's plan is to spend even more money expanding to other related markets hoping for profitability. I would never buy shares in Uber.
If you have to do it sooner rather than later anyway, why not do it sooner? They knew (or should have known) that self-driving wasn't going to be there for decades. Why not bring prices to sustainable levels and let the chips fall where they would?
The cynic suspects it's because various people could continue to milk the cow for a while.
Uber and ride sharing in general is especially screwed because there are other ride sharing services funded by other investors who are _also_ willing to burn money for marketshare. As soon as one of these companies tries to increase pricing for profitability, customers will move to a different platform that is still subsidizing rides.
Seems like a "Congratulations you've played yourself" state for the entire industry.
Terrible industry to invest in, essentially there are other investors who are willing to lose all of their money to ensure that you lose most of your own. It's almost a clever little wealth redistribution engine lol.
How much more scale can Uber realistically hope to achieve? They're in virtually every US city, and they already have over 50% of the on-demand ride business in a lot of places. They've passed the inflection point on the S-curve: If the unit economics don't work out today, it's unlikely that they ever will
Also, it is my understanding that the $22 million loss you cited is exclusive of marketing expenses. That's troublesome because certain driver subsidies are paid out of the marketing line-item (under the dubious justification that the bonuses are attractive to new drivers). To be sustainable, the core business needs to generate enough cashflow to cover those bonuses, too.
Re 2 and 3:
I'm sympathetic to the idea that useful metrics for valuing established companies are not necessarily useful metrics for growing companies, _but_: The fundamental problem is that I don't see a path to profitability (to make the share price worth more than the "scrap" value of whatever assets, including IP, Uber owns).
Contrast this with Tesla (another rapidly-growing company): They have double-digit positive unit gross margins and less than 1% market share. Maybe the stock is over-valued, maybe they won't execute, but it's clear that the company can be profitable (and they've had profitable quarters).
Re 4:
[My cynical take] Right, that's why they've started the Uber Eats product. It gives Uber cover to remain unprofitable for a few more years, until Uber Eats has the same reach as ride share and it's clear that Uber eats isn't a sustainable business, either.
1) The bulk of their apparent loss is a one-time expense
2) They are improving the unit economics of ride sharing and that, if the trend continues, they will be positive in the future.
3) The divisions that are losing money are new ventures like Uber eats and represent a short-term investment that should payoff
If they can reach positive unit economics after subsidies, that would be great for the company. It is still unknown, especially since Lyft and other companies are competing in the space.
I think the main contention is that they could as well be at their max expansion right now.
Not in a purely hypothetical way, but because the actors of the market had the time to digest and react to Uber’s business.
In particular, drivers, legislators, scooter/bike rentals, etc. could be legitimately seen as forces stopping Uber from keeping with their business practices and business model.