Since the company already provided preliminary results in its IPO prospectus, most of the "surprise factor" was taken out of the equation. However, UBER's revenue and net loss numbers did come in at the high end of expectations, representing a small win for the company.
Specifically, revenue increased 20% to $3.1 bln vs. its $3.04-$3.10 bln guidance and its net loss came in at ($1.01) bln compared to its ($1.11)-($1.0) bln projection.
Its other key metrics, such as gross bookings and Monthly Active Platform Consumers (MAPCs), were also in line with its guidance at $14.66 bln (+34%) and 93.0 mln (+33%), respectively.
We believe it's the company's encouraging outlook provided during the earnings call, combined with some short covering, that is really driving the action.
Concerns over UBER's substantial losses and a lack of clarity regarding a path towards profitability have been a major overhang on the stock.
UBER didn't provide specific revenue or EPS guidance in its earnings press release or during the call. Typically, that would be viewed as a negative since it creates additional uncertainty.
However, UBER did offer some encouraging commentary that suggests improving bottom-line results are on the horizon, allowing it to overcome that potential pit fall.
What many investors are particularly focusing on is its remarks regarding the competitive landscape.
Smaller ride-sharing peer Lyft (LYFT) has taken some share from UBER, forcing UBER to compete more on price in order to protect its market position. This has resulted in lower take rates and contribution margins, ultimately cutting into net income.
During the call last night, though, UBER stated that the competitive environment has improved in the U.S. and that it is competing more on brand and service quality.
Additionally, the company said that it expects its take rate for Eats to improve throughout the year as it improves restaurant selection. Consequently, it expects its core platform contribution margin to improve sequentially from the (4.5)% it posted this quarter.
The improved outlook has led to some short covering. It has been reported that almost 70% of the shares that can be lent out for short selling have already moved and that short interest in UBER more than doubled to 36 mln shares last week. With the stock down about 8% since May 16, short sellers are eager to reel in some profits and take some risk off the table.
From a longer-term trading perspective, UBER has a couple compelling growth catalysts. Uber Eats gross bookings surged by 109% yr/yr to $3.1 bln as it grew its platform to 220,000 restaurants.
Eventually, the company believes that Eats has the potential to overtake its ride-sharing business and that it may acquire smaller food delivery providers down the road. The one caveat is that it has a lower take rate than ride sharing (7.8% vs. 20.4%), but UBER expects its take rate to improve for Eats over time.
Last, UBER believes Freight has the potential to become its third $1 bln+ business. This quarter, revenue soared by 200% as it secured several notable wins including CVS (CVS), Cisco (CSCO), Petco, and Huntington.
Key Takeaway: UBER's report and earnings call may not have won over every skeptic, but its commentary does offer some hope that improving results may be on their way.
Furthermore, its potential remains intriguing as Eats and Freight both experienced robust growth in Q1 and have long runways for further expansion.
Overall, this was a good first step in restoring some confidence, but it will now need to deliver on its positive commentary by posting improved margins and profitability next quarter