Uber Stock Up 6% Today – Time to buy UBER Stock?
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The price of Uber stock is going up 6% so far in today’s pre-market activity after the company announced that it is updating its guidance for the third quarter of the year. Figures for this upcoming quarter could include the first-ever positive adjusted EBITDA reported by the company.
According to the SEC filing, the ride-hailing and delivery company is now expecting to report gross bookings of around $22.8 and $23.2 billion for Q3 2021 along with an adjusted EBITDA ranging from minus $25 million and positive $25 million. This figure results in a significant improvement in the firm’s bottom-line profitability compared to a previously forecasted $100 million negative adjusted EBITDA.
Moreover, the company is expecting to ramp up its adjusted EBITDA to a range between $0 and $100 million by the end of the fourth quarter even though the management acknowledged that the actual outcome could still be affected by the current uncertain environment.
“With positive Adjusted EBITDA in July and August, we believe Uber is now tracking towards Adjusted EBITDA breakeven in Q3, well ahead of our prior guidance,” said Nelson Chai, the company’s Chief Financial Officer.
Could this announcement prompt a reversal in Uber’s latest downtrend? In the following article, I’ll outline some plausible scenarios for the stock by assessing its latest price action and fundamentals.
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Uber Stock – Technical Analysis
The price action for Uber stock has been quite interesting lately as we have approached a key support area at the $40 level that has acted as a stronghold for bulls in multiple occasions in the past.
This level coincides with the upper bound of a bullish gap left behind in November after positive news on the vaccine front came from Pfizer (PFE).
Interestingly, the price briefly filled a portion of that open gap on mid-September but bounced quickly and this morning’s pre-market uptick – if it spills over to the live session – could result in a potential break above the upper trend line highlighted in the chart.
Trading volumes have been quite elevated for Uber stock lately as well and that reinforces the importance of this particular level.
Moreover, the MACD has been displaying mild positive histogram readings even as the price of Uber stock has kept declining while the Relative Strength Index (RSI) is forming a bullish divergence as the oscillator is trending higher despite the price going down.
The combination of these readings show that Uber stock could be ready to take a U-turn although a full-blown reversal may not be fully confirmed until the price moves to at least $43.5 per share – which could might as well happen today if this latest development prompts buyers to pile on the stock.
Uber Stock – Fundamental Analysis
Uber sales had been growing at a fast pace before the pandemic stroked, moving from $3.85 billion back in 2016 to $13 billion by the end of 2019 at a compounded annual growth rate (CAGR) of 50%.
During that same period, the firm’s gross profit margins have ranged from 35% to 39% but losses have been quite high including an $8.2 billion net loss reported in 2019 and another $3.7 billion negative result last year.
Even though posting its first positive quarterly adjusted EBITDA might sound like an important milestone, for a company that is valued at $75 billion a $100 million quarterly adjusted EBITDA (best-case scenario) is not really much of an accomplishment.
Moving forward, Uber still has to prove that it can navigate the surmounting pressure it is facing from regulators around the world in regards to the way its workers are treated and classified – currently as independent contractors – and any setbacks on that particular front may affect the business’s ability to keep delivering these positive results.
Overall, Uber has proven its ability to change the way people transport around the world but it has not yet proven that its business model is feasible.
Therefore, despite the positive tone of today’s news, not much has change from a fundamental perspective and it is still too early to tell if this improvement in the firm’s bottom-line results will mark a long-lasting change in the trend for the ride-hailing firm.
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