Financial Advisors Eye Uber As Stock Tanks On Disappointing Q2 Results
The US stock market lost ground in August as investors were processing what was left of earnings season, the July interest rate cut and continuing uncertainty about the global economy and US-China trade tensions.
The Dow Jones Industrial Average inched down by 0.86% in August. The S&P 500 performed a bit better, ending the month 0.53% in the red. On the other hand, tech-heavy NASDAQ Composite slid by 1.66%.
August started with President Trump saying he’ll authorize an additional 10% tariff on $300 billion worth of goods and products from China as of September 1, sending stocks into a dive. China responded by saying that it doesn’t want a trade war but will have to take countermeasures if the tariffs go into effect. Less than a week later, Beijing announced it was going to suspend purchases of US agricultural products. Trump retaliated further saying on August 23 that he’ll boost the 25% tariff on $250 billion worth of Chinese goods to 30% as of October 1. China responded by putting tariffs on $75 billion worth of US goods starting September 1, as well as a 25% tariff on cars and a 5% tariff on car parts imported from the US starting December 15.
In addition, the stock market was affected by the July interest rate cut by the Fed, a move that investors perceived as a sign of slowing growth. In meetings from the Federal Open Market Committee, it was suggested that the decision to cut rates was made on the back of muted inflation and disappointing economic growth, as well as trade uncertainty. The Fed also suggested that further cuts are not excluded from the future.
July non-farm payroll figures showed that the US economy added 164,000 jobs in the previous month, in line with estimates, but lower than the 193,000 figure in June, which was revised down from 224,000. The unemployment rate remained unchanged at 3.7%, also in-line with expectations.
In the meantime, Financial Advisors were focusing on large-cap stocks last month, in line with the overall risk-off sentiment. TrackStar, InvestingChannel’s official newsletter capturing and analyzing the trends of Financial Advisors, compiled a list of the most-searched tickers among Financial Advisors for the month of August. The majority of the stocks on the list are large and well-established companies, such as Amazon.com, Inc. (NASDAQ: AMZN), which ranked in the first spot amid the company’s founder and CEO Jeff Bezos unloading nearly $3.0 billion of his shares and the acquisition of 49% of Future Coupons, an entity owned by Future Group, the second-largest retail chain in India.
Visa Inc (NYSE: V) was the second most-searched ticker among Financial Advisors, followed by Facebook Inc. (NASDAQ: FB).
The company that ranked in the fourth spot in TrackStar’s list is Uber Technologies Inc (NYSE: UBER). On August 8, the company posted its second-quarter results, which included a net loss of $4.72 per share, missing the expected net loss of $3.19 per share. Its revenue of $3.17 billion appreciated by 14.4% on the year but was also $220 million short of expectations.
However, the company, which went public in May, also reported an increase in ride-share bookings by 7% on the quarter to $12.19 billion and a 10% growth in Uber Eats bookings to $3.39 billion. The number of monthly active platform users increased by 7% sequentially to 99 million, lower than estimates of 101.2 million.
Following the disappointing results, Uber’s stock slid by over 24% by the end of August and was 22% lower since the first trading day.
The company took another hit at the end of the month after the appropriations committee in California’s Congress advanced a bill that would make it harder for companies to classify workers as contractors instead of employees. A vote on the bill is expected by the end of the legislative session on September 13.
On the other hand, Uber received a $24 million incentive from the state of Texas to build its hub in Dallas, which is expected to create 3,000 jobs. It also received an extension of the cap on the number of drivers in the city of New York for another year. The NYC Taxi and Limousine Commission also cut the time drivers can spend without a passenger in the car to 31% from 41%.
Despite the lower-than-expected results, sell-side analysts continue to be optimistic about the stock. Raymond James analyst Justin Patterson said in a note last month that the company can re-accelerate revenue growth in the second half of the year and in 2020. Patterson, which maintained his outperform rating and $54 target on Uber’s stock, suggested that growth catalysts for the company could appear in November, when the company reports its third-quarter results and the post-IPO lockup period expires.