Will delivery and freight help the Uber share price to accelerate?

The Uber [UBER] share price has had a bumpy 2021 so far. In the year to date, the Uber share price is down circa 15% to $43.49 at the close on 2 August. The Uber share price is currently trading 32% down from its all-time high of $64.05 set on 11 February.

Although trading 52.6% above its 52-week low of $28.48 set on 20 August last year, the Uber share price has gone into reverse in recent weeks. The Uber share price recorded a year-to-date low of $43.34 on 30 July, falling 8.43% in the week commencing 26 July.

 

Much of this sell-off was caused by SoftBank [9984.TYO] announcing it would be shedding 45 million shares, reducing its stake by around one-third, to offset the reported $4bn loss Masayoshi Son’s company had incurred because of the drama surrounding Chinese ride-sharing app Didi [DIDI].

The fall in the Uber share price has come before the company is set to report Q2 2021 earnings. But what can investors expect from it?

 

Revenue may edge ahead
 

In the three months to the end of March, Uber reported revenue of $2.9bn, down almost 11% from the $3.25bn reported in Q1 2020. Earnings per share was a loss of six cents, versus a loss of $1.70 in the year-ago quarter. Analysts polled by Refinitiv had been expecting $3.29bn and a loss of 54 cents.

Net loss reduced from $2.93bn in Q1 2020 to $108m, helped by a one-time gain of $1.6bn from selling its self-driving unit, ATG to Aurora. Uber CEO Dara Khosrowshahi (pictured above) will join Aurora’s board and Uber will also invest $400 million into the start-up, the companies said.

 

Uber has issued no guidance for Q2 2020, but analysts are expecting revenue to be between $3.46bn and $3.90bn. The consensus of $3.72bn would be a 66% increase from the $2.24bn sales reported in Q2 2020. Zacks data shows analysts expect earnings per share of a loss of 92 cents to a loss of 36 cents. The consensus is a 56 cent loss, which would be an improvement on the $1.02 loss reported in the year-ago quarter.

 

Delivery makes up for mobility shortfall

It is likely that investors will pay close attention to gross bookings for Uber’s mobility and delivery segments. The former brought in $6.77bn in Q1 2021, down 38% year over year, while deliveries booked $12.46bn, up 166%. Eats was up 28% from the year-ago quarter.

The delivery segment outperforming mobility should come as no surprise, given how the pandemic has impacted travel over the last 15 months. Even as things start to return to normal, Uber is struggling to bring drivers back.

By the end of Q1 2021, it had 3.5 million drivers and couriers on its platform and, although this was a 4% increase on Q4 2020, it was a 22% increase on the figure reported in Q1 2020. On top of this, the number of trips made was down 13% year over year to 1.45 billion.

 

Ride-sharing competitor Lyft [LYFT] has been facing similar issues. Both companies are expecting supply and demand to balance out by the end of the current quarter, according to CNBC.

Even if Uber’s driver and ride numbers return to pre-pandemic levels by the end of 2021, it is other areas of the business that could be the key to future growth and driving the Uber share price higher. The company recently moved into groceries, partnering with Costco [COST] and Albertsons [ACI] in the US.

In a note to clients reported by MarketWatch, Cowen analysts argued that Uber was “best-positioned to capitalise” on the offline-to-online tailwinds benefiting app-based food delivery and logistics. They raised their target for the Uber share price from $76 to $80, which would be an 84% increase from its 30 July closing price.

In a move to strengthen its position in the global freight industry, Uber has announced it will acquire logistics technology provider Transplace for $2.25bn.

Mandeep Singh, technology analyst at Bloomberg Intelligence, says the move could be an attempt to diversify the revenue base: “We believe the deal is mostly aimed at bolstering inorganic growth, as there’s no revenue synergies across segments,”.

As a play on the ride-sharing investment theme, the ETFMG Travel Tech ETF [AWAY] has a year-to-date daily total return of 8.43%. The Global X Millennial Thematic ETF [MILN] offers exposure to Uber and other consumer goods and big tech stocks, such as Costco, Amazon [AMZN] and PayPal [PYPL], and has returned 17.17% in the year to date.