When the market closed, Uber shares were trading well below the original IPO price.
Uber CEO told employees Monday not to worry after a rough day for the company’s stock. (Photo by Justin Sullivan/Getty Images)
Topline: In yet another embarrassing showing as a public company, Uber shares fell even further below its IPO price Monday amid rising trade tensions with China and caution among investors when it comes to ride-hailing.
It’s all about profitability, but long-term investors aren’t sweating: Investors are worried that Uber is losing $1 billion per year and may never be profitable. Competitor Lyft also had a disappointing first quarter, causing the stock to tumble, throwing cold water on the near-term ride-hailing market.
“Investors are trying to digest what overall profitability can be. You typically don’t see companies go public generating billions of dollars in losses and to get from where we are today to a clear path to profitability is going to take some time,” Arounian said.
But those betting on Uber say this is just a bump in the road and won’t have any impact on Uber’s long-term potential, especially when it comes to UberEats, UberFreight and autonomous cars.
“The near-term stock dynamics have nothing to do with Uber’s opportunity as a business in the long run to capture a pretty meaningful market,” he said. “If they keep doing what they need to do, the stock performance should follow.”
Still, Uber has a host of challenges. The company’s subsidies to lower the cost of rides and drive growth are unsustainable, said Ted Ladd, dean of research and professor of entrepreneurship at the Hult International Business School, which offers a one-year MBA program, in an email. Driver complaints about pay and impending regulation, such as a ride-hailing tax in San Francisco, are concerns as well.
“These companies are now addicted to cash from public markets to fuel growth, with only a distant hope for profits to fuel growth organically.
