Uber’s optimistic forecast met with tepid Wall Street response after Q4 profits surge

Uber Technologies Inc. outlined its strategy for growth and new business opportunities during its first investor day as a public company, after teasing news on a global car-sharing network and improved algorithms to keep costs low.

Uber on Thursday said it expects $5 billion of adjusted earnings by fiscal 2024, signaling that the ride-hailing giant’s recent profitability milestone will persist over the long-term.

“We now have the musculature and the data structures where we are effectively able to cross our audience through a number of different experiences,” CEO Dara Khosrowshahi said at the investor day event.

The shares fell about 5 percent to $38.20 on Thursday afernoon in New York, reversing gains made in late trading Wednesday after the company reported quarterly earnings.

Uber sees gross bookings reaching $165 billion to $175 billion by 2024 and expects to be cash flow positive by the end of this year, Chief Financial Officer Nelson Chai said.  

The company also said its advertising business is still in its “early days” but projected that the segment would reach $1 billion in gross bookings by 2024.

Atlantic Equities analyst James Cordwell said Uber’s guidance was basically in line with analysts’ estimates and “the lack of upside is maybe what is disappointing the market.” What’s more, long-term targets don’t tend to be a “good idea in a sector as volatile and unpredictable as tech.”

Like its rival Lyft Inc., Uber’s progress toward reaching pre-pandemic ridership was thwarted by omicron, which kept people away from offices, schools and social events.

The companies’ fortunes have ebbed and flowed along with Covid-19 infection rates and restrictions, which affect demand for rides as well as meal delivery. Lyft reported fewer riders than analysts expected in the fourth quarter, but also recorded its highest-ever revenue per rider.

Bullish Q4 report

The company on Wednesday posted its second quarterly operating profit and said ride demand recovered to nearly pre-pandemic levels.

Uber swung to $86 million in adjusted earnings during the fourth quarter compared with a $454 million adjusted loss during the same quarter last year. Revenue surged 83 percent to $5.8 billion.

Since Uber went public in May 2019, the company’s shares have been on a roller-coaster ride, nearly halving at the start of the pandemic in early 2020, when the company’s ride-hail business came to a screeching halt.

Uber has been telling investors it has turned the corner and is set up for long-term growth and profitability as pandemic restrictions subside in many of its core markets, but its shares remain hovering at roughly the same level as when they first listed.

Khosrowshahi on Wednesday said the company had shareholders’ interest in mind.

“We want to be a growth business, but we want to be a profitable growth business and we want to be improving margins going forward,” he told analysts on a conference call on Wednesday.

Khosrowshahi said a better combination of its rides and delivery business would bring down customer acquisition costs — a metric investors closely follow in a market where companies have long competed by outbidding each other with costly customer discounts and incentives.

The company was also tweaking its algorithm to ensure more workers signed up for both ride-hail and delivery services, Khosrowshahi said, adding that it would improve driver dispatching and allow for higher utilization of each worker.

The CEO also promised an update on other new business opportunities, including a global peer-to-peer car rental network. Uber last month acquired Australian car-sharing company Car Next Door and Khosrowshahi said Uber planned to expand car-sharing’s footprint.

“I think with peer-to-peer car rentals, we’ll go global. We’ll make sure we do it in the right way,” he said.

Several automakers have exited the peer-to-peer car-sharing market in recent years, citing high costs and the volatile state of the mobility industry.

Reuters and Bloomberg contributed to this report.

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