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Uber: Don't Be Fooled By Q2 - Still A Sell

Aug. 02, 2022 2:49 PM ETUber Technologies, Inc. (UBER)GRAB63 Comments
Cavenagh Research profile picture
Cavenagh Research


  • Uber's Q2 results outperformed market expectations.
  • More importantly, the company reported the first quarter of net positive cash-flow ever.
  • Shares jumped more than 15% after the announcement.
  • In my opinion, Uber is still highly speculative and the risk/reward appears skewed to the downside.
  • In this article, I highlight why I believe the company’s results do not indicate positive economic profitability.

Uber car waiting for customer

MOZCO Mateusz Szymanski


Uber Technologies, Inc. (NYSE:UBER) presented earnings on August 2nd and outperformed analyst consensus EPS expectations by more than 40% and EPS expectations by 9.5%. More importantly, the company reported the first quarter of

This article was written by

Cavenagh Research profile picture
Experience as an investment analyst for a major BB-Bank, as well as private equity consultant for MBB. Currently working towards the CFA charter, having completed I&II. Passion for risk-assets (Growth, Contrarian, Emerging Market) ex-colleague and close friend of Investor Express

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

not financial advise

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (63)

Cash floooow
great article. uber has no chance. losing money hand over fist
I am a bear in the market but would buy UBER.
@motto5448 Whats your opinion on Uber, as the FED raises rates, do you still consider it a buy?
I wonder how many people followed you and sold or read this and did not buy. You cost them 13% in a few short days. 6 mon it will be much higher.
@GD062XX In the short term, what would be the catalyst to drive this stock higher in your opinion?
munhoi profile picture
China already have driverless taxis starting monday way ahead of UBER

China search engine giant Baidu Inc said on Monday it has obtained permits to operate fully driverless robotaxi services on open roads from two Chinese cities, the first of their kind in the country.

The permits, awarded by the southwestern municipality of Chongqing and the central city of Wuhan, allow commercial robotaxis to offer rides to the public without human safety drivers in the car. They come into effect on Monday.
@munhoi True driverless taxi, without dedicated lanes running location sensors, etc., are still a good decade out. In the meanwhile, I see a massive increase in rideshare over renting cars when traveling, etc.
What threat does self driving taxis from waymo and cruise pose to uber and lyft?
The latter could bypass uber and lyft completely or license to them on very favourable terms to waymo/cruise?

long some uber
Mark Alexander profile picture
@Cavenagh Research

Do you advocate shorting Uber? If so, I can share several better short candidates? If not, why bother writing about it? Why not write about compelling ideas, long or short?

It's strange that you would call a 2.2x price to sales ratio risky. Can you name another large company with operating profit margins similar to Uber (high single digits negative) growing at a similar or faster rate with a lower price to sales ratio? If you can, it's the exception, not the rule, because the valuation is cheap for a high growth company with rapidly improving profit margins near break-even. It's fine to still write a negative article if you believe the company is poorly run or you think the business model is weak, but a rich valuation should not be part of the thesis.
@Mark Alexander Totally agree with you.
With the market back in bull trend this stock is a BUY.
They’ve also had several (non gaap)profitable quarters for the first time recently.

I don’t see this as a sell. Business fundamentals are clearly improving and the scale of the business is large and has a lot of room to grow.
@jvpiter what do you make of Lyft, their stock has also been beaten down, any thoughts?
Have to disagree with you its a buy for me along with LYFT.
It will still be a sell @$45 here. Meanwhile when they have full profitability folks will say how did I miss this.
Uber is a utility at this point. Like the airlines. It will never go out of business. The world needs it too badly. They will eventually find a formula that works. I don’t own a car because of uber. Some cities it’s better than others. Uber will find a way.
@jason1544 Pretty much every major airline has gone bankrupt and wiped out equity investors. I'm not sure how congress will justify bailing out UBER when the company doesn't even acknowledge their drivers as employees? But you never no these days.
@Kyle Mandryk the difference is they're not tied down by depreciating aircrafts, their overhead is solely based on a bunch of coders siting in front of their computers, a simple downsize can turn them profitable
Bobstert profile picture
@jason1544 Why does the world need Uber? There were taxis and other drive services before Uber, that worked for decades. And are still working.
From the WSJ: If Uber can make it in this market, it can make it anywhere, right?

In a major turning point for tech, one of the industry's historically biggest cash guzzlers said Tuesday it is finally generating some coin to the tune of $382 million. That news, along with its fourth consecutive quarter of adjusted earnings before interest, taxes, depreciation and amortization, sent shares up nearly 19% on the day.
dpwroc profile picture
Valution with this company is all over the chart, in speculation. Its all about the long-term survivablity, against the known headwinds present moving forward with regard to UBER and its existence.

2.65 (or so) Billion loss, was it..? We've been here before, witessing massive losses above or below this number in torched money, obviously. Their reported FCF numbers need more looking into, but all taken with a bag salt, given the EBIDTA accounting and the number of write-ins into this area of enumeration. Yet FCF still does not represent actual profiabilty obviously, yet again.

One thing for sure, CEO Dara Krosroshahi knows how to play the hits and really go at what investors need and want to hear in conversation and verbalizing reporting factors... Somewhat funny uhhh, to say the least. Stated... Ill paraphase, 'more drivers than ever..' An exemplary offering, this statement obfuscates, as this number will just keep growing, as it has since day one of UBER just because they are tallying all driver accounts in existance yet not (a very high percentage) are active drivers. Of course the real measure is the number of these drivers, that have USED the driver platform over a shortened period of time of measurement, say the last month, 6 mos, to a year. Counting those drivers will deliver a different wildley number. This statement by him was an eggregious, yet avaialble play in the game of saying what one can because its true, yet highly misleading, category of deceptive commentary as "CEO speak," in earnings. This is no doubt chained to others, as it always is. This what UBER has always done and must do to keep the investor palate salted for consumption.

As I have said, I beleive DK is a sharp and principled person, but he absolutely makes every effort in utilizing distortion in the shell-game of commentary in presentation at all necessary waypoints. It has become quite predictable, at least for myself.

Let's see what happens as these numbers are digested fully by the market over the coming weeks and months. I mean UBER has always said that it is finally coming into its own, and FINALLY turning the corner regarding its business model and evolution... Years of this... UBER carries a lot of risk still, going forward.
Vlae Kershner profile picture
The market usually ignores stock option grants for growing companies, that’s why when they made companies report GAAP first a few years ago it didn’t tank the Nasdaq. I don’t follow Uber too much but would be interested in what the annual percentage of dilution is.
@Vlae Kershner so I have refrained from commenting on this topic but I think it’s time. Back in 2004 when FASB adopted this accounting rule they failed or did not want recognized that expensing options solely on grant price is not an accurate accounting measure. FASB knew this but it was political. Many option grants are never exercised and expire worthless. Analysts know this and therefore somewhat ignore GAAP reporting. So as people chatter about GAAP bla bla bla.. it’s ignored for a very legitimate reason. It’s an inaccurate accounting measure.
TommyIrish profile picture
@Vlae Kershner

"The market usually ignores stock option grants for growing companies"

Because we have in bull market for 13 years bulls don't care about anything.

Well, these grants are a form of compensation and if the market is not going up the grantees will kindly ask to instead to be paid in cash.

At which point is free compensation instead becomes a Tripple Whammy...
@TommyIrish Yeah but you are missing one significant point if not more.

1) If a company exchanges your options for cash the options are retired and no longer can be exercised so no its not free compensation. No corporation or accounting Firm would allow this

2) If that happens the market never pay attention to options granted that are retired for cash. Its also very rare. Most companies reprice options vs offering cash.

So no triple whammy but nice try
nothing to see hear.
UBER is a buy--- Dara is an amazing proven winner ---- so go ahead --sell --short --- UBER trades north of 40 before year end.
TommyIrish profile picture
""DoorDash is valued at about $70B, not that far off Uber's (NYSE:UBER) market cap of $93B." Dec 9, 2020. 02:46 PM

Feels like only yesterday - DASH now $27bn and UBER $47bn.

I see your point but certainly UBER is half-off where it is used to trade and, it has to be said, the CEO DOES come across as a no-nonsense kind of guy and with better metrics than perennial money furnace DASH!

I expect DASH will just keep losing market cap compared to UBER.
siriusmarine profile picture
Funniest thing I read all day! Thanks for the laugh!😂🤣

Somebody lost a lot of money today...Actually, based on all the short comments on all the articles, a lot of people lost money today!! Cheers to the Bulls!

Ooh Rah!
everyone please sell... I didn't buy enough in 25's.... if i see anywhere mid 20's, will back the truck to buy more... thanks
Cavenagh Research profile picture
@Arunt If you would load the truck at $25, you should be aggressive at $29. Not that much a difference.
@Arunt buy more now. I have made mistakes like this before. Stocks a double. Who cares if it’s 23 or 25
@NYSJ UBER is already 4% of my portfolio averaging at around 29's, was trying to get my average cost down.... i am loaded one way or the other... but, will add 1% more anyway tomorrow... thats a good chunk, under 30 is fine.. this should be a 70+ stock in 2 years..
Plan Man profile picture
Lost money ~10% on my short but still up after investing that money in SURG so still worth the trade to me
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