Uber is getting ready to offload their shares on the share market this year, even though the company experienced a fourth-quarter net loss of $865 million. The net loss for Uber could have been much worse if the generous tax benefits did not kick in, without which the losses could have climbed up to $1.2 billion. Despite the losses, Uber has seen massive growth, especially in the emerging markets where the company has performed better than expected.
Uber is trying to diversify its business portfolio by investing heavily in self-driving cars, freight hauling, and electric bike sharing as well as food delivery. Uber’s mantra is to go big or go home, and the company seems to have retained its core values by aggressively expanding at the start.
Uber is looking to invest in promising segments and offset its losses. But its investment in electric bike sharing proved to be counterproductive in some extent as bike sharing companies have been reported to eat into cab sharing companies’ market share during peak hours in urban spaces like New York and San Francisco. Uber was part of Lime’s $335 million investment round as well as buying JUMP for $200 million, which is an e-scooter startup company.
These decisions are spurred by Uber’s stiff competition with Lyft, as both these ride-hailing companies are gearing up for an Initial Public Offering (IPO). Uber is a giant compared to Lyft and valued at $120 billion, whereas Lyft is only valued at $15 billion. Still Uber is being ultra-cautious as investors are keen to see a strong performance from the company.
Lyft’s business model is simple, as it only concentrates on the North American market whereas Uber is investing heavily to acquire new markets and burning through cash by aggressively expanding. That is one of the primary reasons why Uber is reporting losses across consecutive quarters. Services such as Uber Eats are forced to operate with slim profit margins as the company is still busy in market expansion, which is why it is hurting Uber’s bottom line.
Uber’s self-driving cars have also lagged behind its competitors such as Google’s Waymo and General Motors which have experienced greater success and clocked many more million miles than Uber’s autonomous driving cars.
Despite all the setbacks, Uber’s primary business, which is the cab-hailing service has performed strongly as it grew the number of total bookings to more than $50 billion in 2018. This is more than a 45 percent increase over the previous year of 2017. Uber’s net revenue also jumped to $11.3 billion which is a 43 percent increase over the previous period. This proves Uber’s dominance in the industry.
Investors would expect Uber to return to profitability. Companies that experience losses rarely perform well in the stock market, and so Uber needs to get its act together and improve the profitability of its services that have lagged behind in 2018. Uber’s aggressive expansion also needs to be toned down in the near future if the company wants its stocks to perform well at the New York Stock Exchange (NYSE).