09 December 2020

Uber Continues to Offload Unprofitable Businesses

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News shaping
the markets today

     

What’s happening: Uber Technologies announced plans to offload its autonomous driving unit, Advanced Technologies Group, to Amazon-backed start-up Aurora Innovation.

What happened: Uber and its peers have had an incredibly challenging year, with the pandemic-induced stay-at-home orders leading to a massive reduction in traffic.

The latest announcement comes as a part of Uber’s plans to offload money-losing divisions with the aim of achieving profitability, which also saw the company agreeing to sell its air taxi enterprise Elevate to Joby Aviation.

Why it matters: Uber has been looking for options to sell its autonomous vehicle unit, which has been burning cash. Amid a tough year, CEO Dara Khosrowshahi is said to have increased his focus on the company’s ride hailing and food delivery businesses.

Aurora Innovation will be collaborating with Uber to launch self-driving vehicles on Uber's ride-hailing network. The San Francisco-based start-up, which was valued at more than $3 billion in September last year, will prioritise developing self-driving trucks.

As part of the deal, which values Aurora Innovation at $10 billion, Uber will invest $400 million for a 26% ownership stake in the start-up. Also, Uber’s CEO will join Aurora’s board of directors. Despite this stake, the agreement to sell Advanced Technologies Group puts an end to Uber’s dream of having robot taxis replace its human-powered fleet.

In another effort to focus on its core business and achieve profitability, Uber announced the sale of its flying taxi division, Elevate, to another start-up Joby Aviation. Elevate had started offering helicopter trips in New York City, but was forced to suspend its operations due to the pandemic.

As a part of this transaction, Uber will invest $75 million in Joby Aviation and expand its partnership with the company.

Uber has been on a selling spree lately. In October, the company sold a $500 million stake in its freight business. The company also sold its Jump bicycle business to Lime earlier this year.

What to watch: With Uber bringing focus back to its core businesses, investors will look out for details of the company turning profitable. Markets will also monitor Uber’s investments in various companies to know how they pan out.

The Markets Today

     

Crude oil will be in focus today, ahead of the EIA’s (Energy Information Administration) report on inventories.

Context: Oil prices traded slightly lower this morning due to concerns over a surprise rise in weekly crude oil inventories in the US. The downturn was limited, however, by encouraging news around covid-19 vaccines.

Details: The API (American Petroleum Institute) said late Tuesday that oil inventories had unexpectedly risen by 1.141 million barrels in the week ending December 4, versus market expectations of a decline of 1.514 million barrels.

The persistent surge in covid-19 cases in the US and around the world had investors worried about a decline in energy demand. The rising cases also led to Germany and South Korea imposing lockdown restrictions, clouding the prospects of a v-shaped economic recovery. 

Meanwhile, the EIA projected a decline in America’s crude oil production by 240,000 bpd (barrels per day) to 11.10 million bpd next year, revising its earlier forecast of a 290,000 bpd decline.

The UK announcing the commencement of its mass-vaccination program late Tuesday gave some hope to investors. The optimism was supported by the US FDA (Food and Drug Administration) raised no new concerns over the safety or efficacy of the covid-19 vaccine co-developed by Pfizer and BioNTech.

Brent crude declined 0.5% to $48.60 per barrel during the Asian session this morning, after edging higher by 5 cents on Tuesday. WTI (West Texas Intermediate) crude futures fell 0.5% to $45.40 per barrel in Asian trading, after losing 16 cents in the previous session.

What to watch: Investors await data on crude supplies from the EIA today. US crude oil inventories are projected to slide 1.424 million in the recent week versus a decline of 0.679 million barrels in the prior week. Distillate inventories are expected to rise 1.414 million barrels, while gasoline inventories might increase by 2.271 barrels.

Covid-19 will remain a concern area for traders, with total cases surpassing 68.1 million worldwide.

Other Markets: US indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.35%, 0.28% and 0.50%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Germany's balance of trade and current account, South Africa’s inflation rate, retail sales, SACCI business confidence index, Spain's industrial production and consumer confidence, Mexico’s annual inflation rate, Bank of Canada’s interest rate decision as well as the US MBA mortgage applications, job openings and wholesale inventories.

 

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