(Via ZEXPR) Tech stocks showed a weak day last Wednesday, but it was the ride-sharing companies that picked up the pace. Uber Technologies (UBER) for example has become one of the most-watched IPO stocks but has this ride-sharing and meal delivering global company been able to live up to its hype. Here’s CVMarkets taking a look at if Uber is a buy right now in the current stock market rally.
It should be no surprise that the current scenario does not necessarily match up to expectations as the company has lacked profitability for a while now. As the company continues to fight to turn a profit, let’s take a look back at some of the instances where it failed to match up to expectations.
CVMarkets analyst, Danny Morgan, reports, “Taking a look at 2018 itself, uber showcased earnings of 59 cents per share. However, this profit balance did not last long and in 2019, the company lost $5.04 a share. It doesn’t look good as the company continues to burn through cash as per the reports coming in for 2020 where the company is expected to lose $3.87 a share, according to IBD data.”
Once the fourth-quarter results came in on Feb. 10, we were able to assess how the company fell short of revenue targets. Uber then narrowed its loss to 54 cents per share on sales of $3.2 billion.
Gauging The Strength Of The Stock
The Uber stock exhibits a modest 47 out of 99 IBD Composite Rating and while it might not be the best position to be in, it surely helps display its growth.
The company has struggled to grip the investors, but that seems to be changing around. With the Uber shares closing up to 2.6%, the company is set to make the best of this current turnaround.
Securing Independent Contractors As Employees
Uber and its rival company Lyft (LYFT) had won a huge battle on Nov. 4 and this would help them preserve their business model as essentially ride-sharing companies. This legal tussle was won with the approval of Proposition 22 by California voters. Basically, this will help pull back the controversial AB5 labour law that was put into effect in January. Now, with this legislation companies are authorized to reclassify independent contractors as full-time employees.
With Proposition 22 in place, these ride-sharing and delivery companies will be exempted from AB5. This will help put in place job security for its drivers giving them significant pays with benefits such as unemployment compensation and sick leave.
It seems like investors were waiting on the confirmation of this legislation for it helps safeguard the integrity of the business models of these ride-sharing companies. Uber and Lyft will now be able to expand keeping the amended contractor model, thereby pulling in more investors.
CVMarkets analyst, Danny Morgan, reports that “Both Uber and Lyft should make the most of this monumental victory as these companies have always depended on the Golden State for a significant portion of their revenue. And this could be the silver lining on their dark clouds.”
The Next Step
It seems like Uber is not sparing any time, as it announced on Feb. 2 that it would be venturing to buy Drizly, an alcohol delivery service for $1.1 billion in stock and cash.
Uber CEO Dara Khosrawshahi spoke about the future prospects for the company by stating that their goal as a company is to make “people’s lives a little bit easier”.
“That’s why we have been branching into various new categories like groceries, prescriptions, and now alcohol.” He further added.
So, Should You Buy The Uber Stock Or Sell It Right Now?
Taking a look at this stock’s current standing, at 38.62 buy point, it does not seem to be a buy right now. Its shares are currently above 40% above the correct buy point in the current stock market rally and you will have to wait for a new base to form. Only then will it be able to offer a new entry.
Even though the stock showcased market outperformance recently which was evident from its relative strength line hit, the new highs are far too recent to make a solid prediction.
The Uber stock managed to rise on Wednesday by 3.9% and from the looks of it, it’s off by 11% from its 52-week high. However, its shares are back above their 50-day line.
You would presume that the company would find itself to be at a greater standing in the market with the recent high, however, with its rival pacing ahead, Uber needs a lot more than just an improving stock price in order to reel in investors.
Uber’s long term potential is not something that can be ignored, especially with the stock’s recent strength gain in the market.
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