Monday, February 10, 2020

Uber Continues to Take Investors on a Bumpy Ride

  • Dollar
  • Euro
  • Stocks
  • Oil

What’s happening: Shares of Uber Technologies jumped around 10% on Friday after the company reported better results for its fourth quarter than most analysts feared. The ride-hailing app company also announced optimistic guidance for 2020.

What happened: While results came in better than feared, Uber not only continues to be in the red, its loss widened in the fourth quarter. Moreover, the company is facing a ban in several key markets, which could affect its performance this year. 

What were the results: Uber posted a loss of $1.1 billion for the fourth quarter, more than the $887 million reported for the same quarter in the previous year. 

  • The company’s fourth-quarter loss came in at 64 cents per share, better than the consensus estimate of 67 cents per share. 
  • Uber reported 37% year-over-year growth in revenue to $4.07 billion, ahead of the consensus estimate of $4.05 billion. 
  • Adjusted net revenue in freight grew 75% to $219 million. Gross bookings from its top segment, Rides, rose 18% at $13.51 billion, while the Uber Eats segment posted gross bookings of $4.37 billion, up 71%.

Why it matters: Uber’s shares spiked on Friday, even as the US stock markets posted a decline after four consecutive days of strong gains. 

The company’s IPO in May 2019 had been hugely disappointing. The stock, which had opened trading at $45, failed to attract significant investor interest and ended the day at $41. Uber’s shares struggled for months, reaching a record low of $25.58 in November. The stock surged on Friday on bullish comments by CEO Dara Khosrowshahi during the earnings call. Khosrowshahi said that the company would achieve profitability in the fourth quarter of 2020, earlier than its original promise of 2021.

Did investors respond too soon to the CEO’s optimism? After all, Uber has been banned in Germany for lacking necessary licences and is facing existential threat in several American states and in the UK on concerns over safety, after the app allowed drivers to fake their identities in thousands of rides.

SoftBank-backed taxi app Ola is geared up to take advantage of Uber’s plight. Ola will roll out services in London today and is optimistic about toppling Uber from its top spot here. In the growing Indian market, Uber has sold its food delivery business, Eats Uber, to Zomato. CEO Khosrowshahi addressed this during the latest earnings call, saying that Eats is still in “very early innings” and had great prospects in other regions.

What to watch:  Investors will be on the lookout for positive news related to big companies investing in Uber as well as more details of how the company plans to achieve profitability sooner. 


Support & Resistances for Today

Technical Levels News Sentiment
GBP/USD - 1.29025 and 1.312 Negative
USD/JPY - 107.75 and 109.875 Positive
US Crude Oil - 45 and 55  Negative
Silver - 17.5 and 18.5 Positive


Markets Today

The markets are likely to focus on the British Pound today, as investors await the fourth-quarter GDP figures scheduled to be released tomorrow. 

Context: The Pound came off a miserable week and continued its downtrend ahead of the morning session on Monday. The GBP/USD pair hovered around the 1.29 range, only to begin the session down 0.07%.

Details: The GBP/USD pair has been under pressure, not just because of the strength in the US dollar, but also on Brexit-related news. Brexit negotiations may commence as early as March and the divide between the UK and EU still seems to be overwhelmingly large.

Why it matters: The UK and EU have been at loggerheads in trying to reconstruct a 47-year-old relationship. The arduous task involves trade, foreign policy, security and several other policies. 

Michel Barnier has returned as EU’s chief negotiator and has submitted a draft of the region’s negotiating objectives. The UK has responded by submitting a draft of its opening position. Experts went on to comment on how wide the divide seems even at the opening stage of talks.

The latest war over fisheries doesn’t bode well for the negotiations. UK Prime Minister Boris Johnson has gone on record to say the EU’s demands related to fishing will be rejected. What had traders and investors even more worried was a report in the UK Telegraph hinting at Brexit talks falling as early as in April. Many of Britain's largest business groups are urging the UK PM to abandon his stance of threatening to walk away from the negotiations.

The upcoming reshaping of the cabinet by PM Johnson also adds to the uncertainties, which weighs on the Sterling. On the other hand, the US dollar has been benefitting from strong economic data and its “safe-haven” appeal due to China’s coronavirus threat.

What to watch: Investors will be keeping an eye on news from the UK, EU and China due to a light US economic calendar today. UK’s economic growth and manufacturing data will be released tomorrow. Any positive comments by experts could push the GBP/USD pair above 1.30.

Other Markets: Most European indices are trading lower on Monday, with the FTSE 100, DAX 30, IBEX 35 and Stoxx 600 down 0.4%, 0.3%, 0.2% and 0.3%, respectively.


Market Snapshot

EUR/USD (1.0951, 0.07%) Dow ($29,026, -0.06%) Brent ($54.28, -0.35%)
GBP/USD (1.2890, -0.01%) S&P500 ($3,325.78, - 0.02%) WTI ($50.10, -0.44%)
USD/JPY (109.75, 0.02%) Nasdaq ($9,408, -0.02%) Gold ($1,577, 0.24%)


News Shaping the Markets Today

  • US stock futures edge lower
  • Asia stocks end mostly lower amid coronavirus fears
  • Coronavirus death toll crosses 900, confirmed cases now over 40,000
  • Chinese food inflation increases to around 21% in January
  • Europe stocks open trading lower, as coronavirus death surpass SARS


What else to watch today

Canadian housing starts and building permits, US TD Ameritrade Investor Movement Index and Federal Reserve Governor Michelle Bowman’s speech.