Ride sharing companies are one of the many types of businesses out there that have seen their revenues plummet in light of this coronavirus pandemic. The largest company of its kind, Uber (NYSE:UBER), was one of the hottest IPOs of 2019, with the company garnering a lot of attention at the time. However, shares of Uber have dipped a fair bit over the past couple of months as ride sharing revenue continues to fall. In addition to reporting its Q1 financial results on Thursday, the company’s management announced new cost-cutting measures to help prop up the business and even make the company profitable by 2021.
CEO Dara Khosrowshahi went on to describe some of the measures the company will be taking in order to put it on track to becoming profitable next year. In the company’s first-quarter financial results, the chief executive said that the company planned to cut $1 billion in costs, including reducing marketing expenses, capital expenditures, as well as laying off 14% of its staff.
“While our Rides business has been hit hard by the ongoing pandemic, we have taken quick action to preserve the strength of our balance sheet, focus additional resources on Uber Eats, and prepare us for any recovery scenario,” said Khosrowshahi. “Along with the surge in food delivery, we are encouraged by the early signs we are seeing in markets that are beginning to open back up. Our global footprint and highly variable cost structure remain an important advantage, as our expectation is that the Rides recovery will vary by city and country.”
Management stressed the importance of making the company profitable by 2021. That’s definitely a possibility, but Uber is still reporting sizable losses. Revenue had grown by 14% in comparison to last year. However, the company’s net loss came in at a sizable $2.9 billion. However, much of that figure was due to an impairment write-down rather than losses from the business itself. When one factors this out of the equation, Uber’s operational losses come closer to around $1.1 billion.
Investors were quite happy from the news, with shares of Uber jumped by 11% over the course of the day followed by an extra 6% in after-hours trading. Considering the fact that, in some places, businesses are expected to reopen sometime this summer, it seems quite likely that demand for ride sharing could see a surge soon. If so, Uber could end up staging a bit of a comeback later this year, although this is all still yet to be seen.
Uber Company Profile
Uber Technologies is a technology provider that matches riders with drivers, hungry people with restaurants and food delivery service providers, and shippers with carriers. The firm’s on-demand technology platform could eventually be used for additional products and services, such as autonomous vehicles, delivery via drones, and Uber Elevate, which, as the firm refers to it, provides “aerial ridesharing.” Uber Technologies is headquartered in San Francisco and operates in over 63 countries with over 91 million users that order rides or foods at least once a month. Approximately 83% of its gross revenue comes from ridesharing and 16% from food delivery. – Warrior Trading News
