Explosive Growth and Barely Cash-Positive - InvestingChannel

Explosive Growth and Barely Cash-Positive

Proprietary Data Insights

Financial Pros Food Delivery & Mobility Searches in the Last Month

#1Uber Technologies2,214
#2DiDi Global793
#5Grab Holdings Limited69


Explosive Growth and Barely Cash-Positive

Uber (UBER) announced its Q3 earnings yesterday. It keeps picking up pace adding users to its platform. But it continues to lose money. 

Among food delivery and mobility companies, financial pros’ searches for Uber come in every month at nearly 2x the closest stock. (Interestingly, that isn’t Lyft (LYFT), as you can see above.)

But recent news of the company’s dive into advertising, as we covered in the latest issue of The Juice, caught the attention of many investors.

Wall Street reacted well to Uber’s financial report as the company continued its slow pivot from burning to generating cash, pulling in $439 million from operations during Q3.

Shares are up more than 50% from their June lows but still down more than 50% from their 2021 highs.

So what are investors to make of this company?

Uber’s Business

Uber is a ride-hailing and food delivery company offering membership services, although it doesn’t require a subscription to use its app. 

People take over 21 million trips a day through the Uber app. 

The firm operates in over 10,500 cities across 70 countries. Its app boasts 124 million active monthly platform users and $116 billion in annualized run-rate gross bookings. 

The firm breaks its revenues into three categories: mobility, delivery, and freight. 

Mobility accounts for about 46% of its revenues, delivery 33%, and freight 21%. 


The company just launched an advertising division and unveiled Journey Ads, an engaging way for brands to connect with riders during their trips.

Additionally, its Drizly brand, which delivers alcohol, launched Drizly Ads, where partners can run full-funnel advertising. 


Uber grew its gross bookings by 26% year over year to $29 billion during Q3 2022. Revenues grew 72% YoY based on its Q3 2022 financial results. 


Like many tech startups, Uber had explosive growth over the last five years. 

The firm went from $7.9 billion in revenues in 2017 to $17.4 billion in 2021. 

This year, it’s made $23.2 billion in revenues in its first three quarters, more than double what it made in the first three quarters of 2021.  

After years of losing money, Uber delivered an operating cash flow of $432 million and a free cash flow of $358 million during Q3 2022. 

Uber has $4.4 billion in total cash and $11.4 billion in total debt. Despite this imbalance, its current ratio of 0.98x indicates the firm has liquid capital to meet its short-term liabilities. 



UBER isn’t yet profitable and therefore has no P/E GAAP ratio. The same is true of several of its competitors, including DoorDash (DASH), Grab Holdings (GRAB), Lyft, and DiDi Global (DIDIY). 

Many of these firms follow the same business model of growing their user bases and figuring out monetization later. 

This model worked well in a near-zero-interest-rate environment, when money was essentially free. But as rates rise, the focus needs to shift to becoming profitable. 

UBER trades at a price-to-sales ratio of 2x, which is notably better than DASH at 2.7x and GRAB at 7.2x, but not as strong as LYFT at 1.3x and DIDIY at 0.19x. 



UBER has a gross profit margin of 33.7%, significantly weaker than DASH at 50.4% and LYFT at 35%, but stronger than GRAB at -46% and DIDIY at -5.4%. 

UBER’s net income margin of -39% is comparatively weak. DASH has a net income margin of -12%, LYFT -24%, and DIDIY -28%. 

Only UBER and DASH generate cash from operations. The rest burn through funds, although GRAB and DIDIY lost more than $1 billion each, whereas LYFT lost a more modest $162 million.

Return on equity is also troublesome. UBER is at -86%, DASH -11%, LYFT -77%, and DIDIY -40%. Meanwhile, GRAB is at a stunning -5,290%. 

Again, this is all a reflection of putting growth ahead of profits. 



UBER has grown at a blistering pace. 

Q3 revenue growth was 72% from the same quarter last year. And its full-year revenue growth of 99.4% YoY is notably higher than its competitors’. The closest competitor is LYFT at 51.4% revenue growth YoY. 


Our Opinion 6/10

UBER is a fast-growing company that’s made its presence known worldwide.

While it isn’t yet profitable, it does generate positive cash flow, a recent step that’s critical to the company’s future.

Yet, as the recent decline in Meta Platforms illustrates, investors need to see the company fire on all cylinders.

Uber faces heavy competition from traditional retailers such as Walmart, Domino’s Pizza, and Amazon, who can take market share away from Uber’s delivery business.

And if autonomous driving is the future, you must think Tesla, Apple, and Alphabet will enter the mobility business.

Nonetheless, Uber is in a better position than its peers in nearly every category, and its new advertising business adds a critical dimension that, although speculative, could transform the company.

That’s why we think Uber is a good speculative play to buy on dips as long you manage your capital appropriately.

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