Uber Technologies (UBER) is a global company that is transforming the ride-sharing and meal delivery markets. After a much-hyped debut on May 10, 2019, Uber stock is one of the most watched IPO stocks today, but is Uber a buy right now in the current coronavirus stock market rally?
Uber Stock Fundamental Analysis: Lack Of Profitability
Uber is in the midst of a dramatic turnaround, as the company fights to turn a profit. In 2018, Uber had earnings of 59 cents per share, but the profit was temporary. The company lost $5.04 a share in 2019, as the company continues to burn through cash. For 2020, the company is expected to lose $3.87 a share, according to IBD data.
On Nov. 5, Uber reported a loss of 62 cents per share, while sales fell 18% year over year to $3.13 billion.
According to the IBD Stock Checkup, Uber stock has a modest 62 out of a highest-possible 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths.
Proposition 22 will roll back California’s controversial AB5 labor law, which went into effect in January. The legislation mandates that companies reclassify many independent contractors as full-time employees.
But Prop. 22 would exempt ride-sharing and delivery companies from AB5. It would also establish pay requirements for drivers and other benefits such as sick leave and unemployment compensation.
“The underlying business models for Uber and Lyft were hanging in the balance if Prop. 22 did not pass in California to keep the contractor model,” Wedbush Securities analyst Daniel Ives wrote in a note to investors.
He added the vote was a “landmark victory” for Lyft and Uber stock, which derive a significant portion of their revenue from the Golden State. “This removes a significant overhang and dark cloud for the likes of Uber and Lyft,” Ives wrote.
On Feb. 2, Uber announced it would buy Drizly, an alcohol-delivery service for $1.1 billion in stock and cash. “Wherever you want to go and whatever you need to get, our goal at Uber is to make people’s lives a little bit easier,” said Uber CEO Dara Khosrowshahi. “That’s why we’ve been branching into new categories like groceries, prescriptions and, now, alcohol.”
Is Uber Stock A Buy Or Sell Right Now?
Uber stock is well extended from a cup with handle’s 38.62 buy point, so the stock isn’t a buy right now. Shares are about 54% above the correct buy point in the current stock market rally.
The stock’s relative strength line hit new highs during the breakout move, a sign of solid stock market outperformance.
Uber stock jumped 5% Wednesday ahead of the company’s earnings results after the close. The company is expected to lose 54 cents per share on revenue of $3.4 billion.
Uber Stock Competitors: Lyft
Lyft stock surged after the company issued its Q4 earnings report on Feb. 9. The ride-hailing company posted a loss of 58 cents a share on revenue of $570 million. Wall Street analysts expected the ride-sharing firm to announce a loss of 71 cents a share on revenue of $553.85 million. Lyft jumped 10% Wednesday.
Despite Uber’s long-term potential and improving stock price, the company’s current fundamentals leave a great deal to be desired for growth investors. Still, the stock’s recent strength cannot be ignored.
For more leading stocks and stocks approaching correct buy points, check out these IBD Stock Lists, like the Stocks Near A Buy Zone. To see the current stock market trend, check out IBD’s signature daily analysis, The Big Picture.
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