Uber Q1 preview: Where next for Uber stock?

When will Uber release Q1 2022 earnings?

Uber is scheduled to release first quarter earnings after US markets close on Wednesday May 4.

Uber Q1 earnings preview

The picture is very different for Uber in 2022 compared to 2021. Uber’s diversification meant that last year, during lockdown, it was able to lean more on its Delivery arm that experienced a surge in demand as bookings for its ride-hailing Mobility unit collapsed. Now, we are seeing Mobility recover as people start travelling again and its Delivery arm moderate as people order-in less and start eating out again. Plus, Uber now has a sizeable Freight division that is set to be the next catalyst for the business.

The picture does vary region to region. Covid-19 is still causing chaos in some parts of Asia, where growth is expected to be the slowest this quarter, compared to a strong revival in North America, EMEA and Latin America. Other headwinds include a rise in costs in 2022 and the challenge of recruiting more drivers to meet rising demand this year in what is proving to be a tight labour market.

Wall Street forecasts overall revenue will grow 75% to $6.1 billion in the first quarter of 2022 from $3.5 billion the year before.

Uber is set to turn to adjusted Ebitda – Uber’s headline earnings measure – of $135.1 million in the quarter from the $359.0 million loss booked the year before. That would mark the third consecutive quarter of positive earnings and be above the top-end of Uber’s $100 million to $130 million guidance range.

Uber’s Mobility division responsible for its ride-hailing operations is in recovery mode after being hit hard during the pandemic, when demand collapsed as people were told to stay at home and businesses forced to shut during the height of the pandemic. Bookings and revenue have both been steadily recovering over the past year, but this should really take-off in 2022 assuming a new variant of Covid-19 doesn’t plunge countries back into lockdown, with an impressive rebound forecast in the first quarter:

There are two major themes in play at Uber’s Delivery segment that ships food and groceries to customer’s doors. The first is that that bookings and revenue are set to suffer a severe slowdown in 2022 as it comes up against tough comparatives from the year before, when demand exploded as people ordered more whilst stuck at home during lockdown. Still, the unit is expected to post an impressive 37% rise in revenue after more than doubling the year before. But, the slowdown in growth is being countered by the second theme, which is that Uber Delivery has started to generate profits and is on course to report its second consecutive quarter of positive adjusted Ebitda this week:

Uber’s smallest but fastest-growing division is Freight, which manages around $16 billion worth of goods. The company’s topline will be flattered in the first quarter by the acquisition of Transplace that was completed last November. This has combined Uber’s smallest but fast-growing unit transporting freight with the shipping technology and operational tools offered by Transplace to create what Uber has described as ‘one of the world’s leading logistics technology platforms’.

Importantly, Uber said that Transplace would ‘accelerate Uber Freight’s path to profitability and help the segment to break even on an Adjusted EBITDA basis by the end of 2022.’ The division will remain a drag on earnings in the meantime and is expected to offer slimmer margins than other parts of the business even when it does turn profitable. The unit is likely to have remained in the red in the quarter, albeit not as much as the year before, but Wall Street believes it can eke out a small profit this year.

The outlook will be a key factor in how markets react to the results this week. Markets are anticipating Uber to target gross bookings of $28.6 billion and a new quarterly adjusted Ebitda record of $248 million in the second quarter of 2022. Wall Street believes Uber can grow its topline by around 58% in 2022 and deliver over $1.3 billion worth of adjusted Ebitda.

Where next for Uber stock?

Uber shares have been stuck in a downtrend for over a year and lost over 44% in value to trade at just over $30 today.

The stock appears to have found a floor last month at $28.50, which needs to hold to avoid creating a new lower low. Notably, this also acted as a level of support in both June and August 2020. A break below here could be significant and open the door to sub-$26. The bearish RSI, twinned with a notable rise in trading volumes over the past 10 days, suggests the stock could continue to come under pressure.

On the flip side, the stock needs to break above the previous highs of the downtrend to install confidence that the slide seen over the past year has come to an end. A move above both the 50-day and 100-day moving averages and the $37.50 peak of the last move upwards is the first step toward this. Above here, the stock can look to breach the $40 mark before it can target the 2022-high of $44. Notably, the 49 brokers that cover Uber believe the stock can climb considerably higher and almost double over the next 12 months with an average target price of $58.

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