Uber Technologies (UBER) says it could notch its first quarter of adjusted profit in Q3, well ahead of plans, as more people venture out and use the ride-hailing service. UBER stock gapped up.
The San Francisco-based company, which launched a decade ago, said in an SEC filing Tuesday that it projects EBITDA between a loss of $25 million and a profit of $25 million in the third quarter. That outlook is better than its previous expectation for a loss of less than $100 million for the third quarter. Uber also expects to post adjusted EBITDA in the fourth quarter of up to $100 million.
The pandemic threw a monkey wrench in Uber’s business as restaurants and other venues shut down. While Uber and rival Lyft (LYFT) had already been trimming costs by phasing out customer discounts, Covid-19 forced deeper cuts. As a result, both Uber and Lyft sold off their self-driving segments and had massive layoffs.
“They say that crisis breeds opportunity and that’s certainly been true of Uber during the last 18 months,” said CEO Dara Khosrowshahi. “Thanks to the team’s tireless work we’ve not only grown our global leadership across both Mobility and Delivery; we’ve done so more profitably than ever before. As a result, Uber is reaching an important milestone.”
CFRA Research analyst Angelo Zino views the quicker-than-expected ability to reach adjusted profitability as a notable positive but still thinks investors may “question the sustainability of these efforts as regulatory uncertainty remains a major risk.”
KeyBanc analyst Edward Yruma agreed. In a note to clients today, he said: “A move to increase driver wages in ride-share could result in higher customer costs, which would be depressive to demand.”
Other challenges include the lingering labor shortage and a legal battle with big cities like New York City who want to cap how much they can charge for food deliveries.
Shares raced up 12% to 44.66 on the stock market today. UBER stock popped back above its 50-day line, according to MarketSmith chart analysis. But shares are still well off their all-time high of 64.05 achieved on Feb. 12.
Uber’s relative strength line also spiked up, although it is still near all-time lows. Its fundamentals are weak as the company attempts a difficult comeback from pandemic lows. Its RS Rating is just 14 out of a possible 99, while its EPS Rating is 59.
Meanwhile, Lyft shares climbed 6.7% and DoorDash (DASH) was up 1.5%.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
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