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Heading into its Q4 earnings report, Uber (UBER) was facing a high bar to hurdle, thanks to the rideshare and delivery company's strong financial results in recent quarters as it capitalizes on healthy travel demand, a return to office trend, and share gains against smaller rival Lyft (LYFT). These lofty expectations were reflected by the stock's 40%+ rally since UBER's Q3 report in late October, which took shares to record highs during yesterday's session.

Although the stock initially succumbed to a sell-the-news reaction, UBER did deliver outstanding results yet again, crushing EPS estimates while gross bookings jumped by 22% yr/yr to $37.6 bln. CEO Dara Khosrowshahi summed it up succinctly, stating, “Uber’s core business is stronger than ever as we enter the busiest period of the year.”

• Gross bookings and adjusted EBITDA -- the two key metrics that market participants really home in on for UBER -- both came in above the company's guidance ranges. Specifically, UBER guided for gross bookings of $36.5-$37.5 bln and adjusted EBITDA of $1.18-$1.24 bln.
  • Fueled by solid bookings growth in both Mobility (+29%) and Delivery (+19%), as well as accelerating growth in its high margin advertising business, adjusted EBITDA surged by 91% yr/yr to $1.30 bln.
  • The nascent advertising business is on track to surpass a $1.0 bln run rate this year, further supporting adjusted EBITDA margins, which hit a record high of 3.4% in Q4.
• In addition to UBER's rapidly improving profitability, another main storyline revolves around its consistent market share gains against LYFT. An ability to attain and retain drivers has provided UBER with a key competitive advantage.
  • On that note, Reuters reported yesterday that LYFT is now guaranteeing weekly earnings for its drivers in an attempt to steer more drivers to its app. Of course, that will come at a cost in the form of lower contribution margin, or revenue per active rider. LYFT is scheduled to report earnings after the market close on February 13.
• Turning to Delivery, Mr. Khosrowshahi noted during the earnings call that Uber Eats grew category position in ten out of its top ten markets. Additionally, Uber Eats is seeing increases in order frequency, basket size, and visitors to the app. Its foray into the grocery vertical is also paying dividends with grocery now approaching a $7.0 bln run rate.
• UBER's guidance indicates that business across both segments is expected to remain healthy in Q1. The midpoint of its gross bookings guidance range of $37.0-$38.5 bln represents estimated yr/yr growth of 20%, while its adjusted EBITDA guidance of $1.26-$1.34 bln reflects growth of 71% at the midpoint.
  • Along with the favorable rideshare trends and market share gains in both Mobility and Delivery, UBER stands to benefit from a growing membership base that now totals about 19.0 mln members. These users tend to spend more on the app and account for a higher percentage of gross bookings than non-member users.

Overall, there was plenty to like about UBER's results and outlook as the company is executing exceptionally well. We chalk up today's relatively modest sell-off to some profit-taking after the stock's huge rally.