Apr 12, 2019

Why Uber's value will be at risk

Photo: Drew Angerer/Getty

Uber is seeking an eye-popping valuation of $90 billion-$100 billion in its IPO — even north of $120 billion, if senior executives are to receive a bonus payday.

What's happening: While the buzz around the company is likely to continue, serious questions about its core businesses create risks for Uber's share price once it's publicly traded.

The big picture: Uber's main business is of course ride hailing. It's second-biggest is Uber Eats, its food delivery service. The growth of both, however — while tremendous overall — slowed considerably the second half of last year:

  • Uber's base of active monthly ride-hailing and Uber Eats users grew by 33.8% last year, down from 51% growth the prior year. And its revenue, while up 42% last year, slowed from 106% in 2017, reports Reuters' Joshua Franklin.
  • Uber Eats' "adjusted net revenue" — deducting added driver fees — fell from $218 million in the second quarter last year to $165 million in the fourth quarter, writes Bloomberg's Eric Newcomer.

Let's focus in on ride-hailing:

For years, Uber's main argument for its high valuation was that it was transforming itself into an autonomous ride-hailing service, and would thus be astronomically profitable by saving on driver costs. Co-founder Travis Kalanick called the shift to driverless "existential" in terms of Uber's success and value.

  • But fully driverless technology has proven far more difficult to develop, and almost no one thinks it will be commercialized before the 2030s, if not a decade or more after that.
  • Yet even when it does happen, Uber's regulatory filing singles out the possibility that rivals could commercialize driverless systems before it can, and it that case, it would be hurt financially.
  • Tasha Keeney, an analyst with ARK Invest, predicts in an email analysis that is precisely what will happen: Uber will end up relying on rival technology companies. She said fees will rake off a large share of Uber profits, seriously reducing the ride hailing company's take.

When it isn't shockingly frank about its challenges, the Uber filing is astonishingly hubristic: Uber says its total addressable market in various businesses is all money spent, period, reports the FT's Richard Waters and Shannon Bond.

  • It has a shot, it says, at all $5.7 trillion spent on personal mobility everywhere in the world, even though it no longer operates independently all over the world; at all $2.8 trillion spent at restaurants; and $3.8 trillion on freight trucking.
  • As a reality check, Brent Thill, an analyst with Jefferies, puts the total U.S. food delivery market at $200 billion, but says it won't be a "winner-take-all industry," per Bloomberg's Cristin Flanagan.

The bottom line: Pay attention to this — Lyft, Uber's smaller U.S. competition, debuted on April 1 at $72 a share and rose to $78.29 on its first day of trading. Today, it's trading at $59.97, a 16% below its initial price.

Go deeper:

Uber is committed to self-driving cars

Uber Eats had $7.9 billion in gross bookings last year

Go deeper

Updated 26 mins ago - Politics & Policy

CNN crew arrested live on air while reporting on Minneapolis protests

CNN's Omar Jimenez and his crew were arrested Friday by Minneapolis state police while reporting on the protests that followed the death of George Floyd, a black man who died in police custody in the city.

What happened: CNN anchors said Jimenez and his crew were arrested for not moving after being told to by police, though the live footage prior to their arrests clearly shows Jimenez talking calmly with police and offering to move wherever necessary.

First look: Trump courts Asian American vote amid coronavirus

Photo: Sarah Silbiger/Getty Images

The president's re-election campaign debuts its "Asian Americans for Trump" initiative in a virtual event tonight, courting a slice of the nation's electorate that has experienced a surge in racism and harassment since the pandemic began.

The big question: How receptive will Asian American voters be in this moment? Trump has stoked xenophobia by labeling COVID-19 the "Chinese virus" and the "Wuhan virus" and equating Chinatowns in American cities to China itself.

How the U.S. might distribute a coronavirus vaccine

Illustration: Annelise Capossela/Axios

Now that there are glimmers of hope for a coronavirus vaccine, governments, NGOs and others are hashing out plans for how vaccines could be distributed once they are available — and deciding who will get them first.

Why it matters: Potential game-changer vaccines will be sought after by everyone from global powers to local providers. After securing supplies, part of America's plan is to tap into its military know-how to distribute those COVID-19 vaccines.