UBER - Uber Stock Falls After Arete Research Downgrades Citing Earnings Quality Concerns
Uber Stock ( NYSE:UBER )
Arete Research, an investment firm, downgraded the ride-sharing business Uber Technologies ( NYSE:UBER ) on Thursday, citing concerns about the “earnings quality” of both Uber and its primary rival, Lyft. This caused Uber stock to fall by more than 2%.
Since the company’s growth rate in the past three quarters was boosted by one-time “business model modifications,” which do not seem to be in the cards for 2023, analyst Richard Kumar downgraded Uber (UBER) to neutral from buy and dropped the price objective to $26.
“Uber’s delivery competitors already report decreased orders, as they ‘concentrate on earnings,’” Kumar said in a message to customers. “While we believe the Mobility margins are accurate, we found it difficult to see Uber achieving growth and profitability in the Delivery business. Both [businesses’] pricing increases will put price elasticity to the test.”
Thursday’s midday trading saw a 2.8% drop in Lyft shares.
In addition, Kumar pointed out that for Uber and Lyft to achieve their goals, they will require operating leverage and accelerated growth, and that, with incremental margin improvement being seen as “unrealistic,”, especially for Lyft, it is difficult to envision how the companies will achieve their goals.
Kumar also said that the subscription package offered by Uber (UBER) seems appealing to users, but that very few people are really paying for it.
The fact that 12-month deferred revenue (classified as contract obligat...
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