Buy Uber Stock Before Q2 Earnings Despite Early Disappointment?

Shares of Uber UBER have fallen over 9% since reports came out on July 29 that it would cut hundreds of marketing jobs. The ride-hailing firm also saw its stock price sink over 3% Friday as the broader market fell following President Trump’s new Chinese tariffs announcement.  

Now the question is should investors consider buying Uber stock before it reports its second-quarter financial results even though the technology firm has struggled as a public firm after its insane pre-IPO hype?

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News broke earlier this week that Uber cut roughly 400 jobs from its marketing department. The firm eliminated around a third of its marketing unit, as it deals with increased competition and price wars. “Put simply, we need to get our edge back. Being fast wins,” Uber CEO Dara Khosrowshahi wrote in an email to employees. “Many of our teams are too big, which creates overlapping work.”

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Uber is clearly trying to do all it can to show Wall Street and investors that it is committed to cost-cutting measures as it fights off rival Lyft LYFT and others. Many voiced their concern after Uber posted a $1.03 billion loss from operations in its first quarter as a public company. This figure came in far worse than the year-ago period’s $478 million loss, as it spent more heavily on everything from advertising to headcount.

Overall Q1 revenue did climb 20% from $2.58 billion to $3.09 billion. However, many growth-minded investors likely anticipated faster expansion. Plus, Uber’s adjusted (minus some payments to drivers and other costs) core platform revenue, which comes from ride-hailing and delivery, popped only 10% to $2.62 billion. In the prior-year period, this key metric soared roughly 80%.

Meanwhile, Uber’s core platform contribution margin fell from +17.9% in Q1 2018 to -4.5%. Investors need to pay close attention to this decline as it could signal that Uber will continue to lose more money as it pulls in more revenue, since the figure basically describes Uber’s profit margins from every ride-hailing trip or Uber Eats delivery.

Uber reports its business in two key segments: Core Platforms and Other Bets, which includes freight and more. In the long-run, the ride-hailing firm hopes it can become the Uber of everything and has compared itself to giants like Amazon AMZN. But as well-funded startups push into markets around the world, Uber could face a much harder time than many might have assumed a few years ago. This has, as we mentioned, ratcheted up the price wars, which has made profits more elusive.

Luckily, Uber’s Monthly Active Platform Consumers jumped 33% to 93 million, with trips up 36%. The company also currently operates in 63 countries and 700+ cities and boasts that its 3.9 million drivers, who are independent contractors, complete 14 million trips every day.

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Our current Zacks Consensus Estimates call for Uber to post second-quarter revenue of $3.41 billion. This would come in 10.3% higher than Q1 2019’s $3.09 billion, which marked 20% year-over-year expansion. Meanwhile, the company’s full-year fiscal 2019 revenue is projected to climb 27.5% to reach $14.36 billion. Peeking further ahead, Uber’s top line is expected to reach $19.26 billion in fiscal 2020, which would mark 34% expansion from our 2019 estimate.

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