Last Tuesday, rideshare giant Uber Technologies (NASDAQ: UBER) reported earnings that exceeded Wall Street expectations, resulting in a significant uptick in its stock price. The company posted earnings per share of $0.47, surpassing the anticipated $0.31. Additionally, Uber's quarterly revenue came in at $10.7 billion, edging out expectations of $10.57 billion.
Uber experienced growth across both its rideshare and food delivery segments. Following the earnings report, Uber CEO Dara Khosrowshahi stated, "Uber’s growth engine continues to hum, delivering our sixth consecutive quarter of trip growth above 20%, alongside record profitability."
In an interview on CNBC’s "Squawk Box," Khosrowshahi addressed concerns about whether a weakening economy might stunt Uber's growth. He argued that some parts of Uber’s business are "counter-cyclical," explaining that economic downturns often lead to an increase in drivers seeking extra income. This surge in drivers, in turn, reduces wait times and enhances overall operational efficiency.
Khosrowshahi also noted that food delivery has become a "sticky habit" for many consumers, with the company addressing affordability concerns through UberOne, a subscription service offering free delivery on food and grocery orders. Over half of UberEats users have signed up for UberOne.
Looking ahead to the third quarter, Uber projects gross bookings between $40.25 billion and $41.75 billion, indicating 18% to 23% year-over-year growth on a constant currency basis. This estimate slightly trails analysts’ expectations, who forecasted bookings of $41.18 billion.
Uber's robust second-quarter performance comes in the wake of Tesla (NASDAQ: TSLA) postponing the launch of its RoboTaxi service. Tesla was initially slated to unveil its RoboTaxi business during an event on August 8th, but the event has been delayed until October to allow for the development of more prototypes.
Tesla’s RoboTaxi service is expected to enable Tesla owners to rent out their vehicles through Tesla’s rideshare network. CEO Elon Musk has claimed that Tesla owners could earn up to $30,000 annually by participating in this program.
Despite the potential of Tesla's RoboTaxi, Khosrowshahi expressed skepticism about the service's ability to meet peak demand. He also questioned the business model, stating, "It's not clear to me that the average Tesla owner—or the owner of any car—will want to have that car used by a complete stranger." Nonetheless, Khosrowshahi acknowledged the potential of RoboTaxis and does not view them as a "zero-sum game." He even suggested that "hopefully Tesla will be one of [Uber’s partners]" in the future.
Tesla’s entry into the rideshare market has certainly captured the attention of investors, with the company gaining $385 billion in market capitalization since announcing the program. However, the viability of the RoboTaxi business model and the timeline for its rollout remain uncertain. For now, Uber remains the dominant player in the rideshare industry, continuing its growth trajectory. However, the company will eventually need to decide whether to partner with or compete against Tesla as RoboTaxis become more widespread.
Year to date, Uber Technologies is up nearly 16%. With an average price target of $86.66, the stock has an implied upside potential of over 21%.
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