Uber recently experienced an 11% drop in its share price as it announced slower booking growth, impacted by rising prices in its ride-hailing services. Although Uber reported solid revenue growth in the third quarter, investor expectations were dampened by the company’s slightly lower-than-expected forecast for customer spending.
Uber’s Third-Quarter Financial Highlights
In the third quarter ending September, Uber’s revenue hit $11.2 billion, a 20% increase from $9.3 billion in the same period last year, surpassing analyst expectations. Operating income jumped to $1.1 billion, driven by a 16% increase in bookings and a rise in monthly active users to 161 million, up from 142 million the previous year. However, as the company raised ride prices in response to increased insurance costs, growth in some areas, including California, showed signs of slowing.
Impact of Higher Prices on Demand
Uber’s CEO, Dara Khosrowshahi, noted that higher prices due to insurance costs, which have surged in the U.S. over the past two years, have slightly dampened demand, especially during “weekend party hours” when consumers tend to be more price-sensitive. However, weekday demand remains robust, showing steady growth.
Uber’s Holiday Quarter Outlook
For the current quarter, Uber anticipates gross bookings between $42.75 billion and $44.25 billion, marking a growth rate of 16-20%. This is slightly below analysts’ forecasts of $43.7 billion, a factor contributing to the recent share dip. Analysts expect adjusted earnings between $1.78 billion and $1.88 billion, aligning with Uber’s projected range.
Uber’s Strategic Expansions
Uber continues to expand beyond traditional ride-hailing. Recent partnerships with Google’s Waymo and GM’s Cruise on autonomous vehicle services underscore Uber’s ambition in self-driving technology. Additionally, Uber now offers features like teen accounts, motorbike rentals, and ride reservations, aiming to become a versatile “super app.” The company also expanded into other sectors like train and flight bookings, food delivery, corporate logistics, and advertising.
Growth Beyond Urban Centres
Khosrowshahi highlighted that Uber still has significant growth opportunities, especially in suburban and secondary markets within the U.S. and abroad. The company is actively working to tap into these less densely populated regions, where demand for Uber services is not yet saturated.
Future Outlook and Strategic Acquisitions
Bolstered by a substantial $9 billion cash reserve and an 80% stock price increase this year, Uber recently explored acquiring the travel booking platform Expedia. Although Uber’s CFO, Prashanth Mahendra-Rajah, confirmed that the company is selectively considering acquisition opportunities, he emphasized that Uber has high standards for mergers and acquisitions.
Key Takeaways: Strong Foundation, Rising Costs
As inflationary pressures and a complex economic landscape shape consumer spending, Uber remains confident in its growth potential, despite the impact of higher ride prices. With new features and partnerships in place, Uber continues its transformation into a comprehensive platform that aims to meet diverse consumer needs in the mobility and travel sectors.
Source: (FT.com)
