Uber’s Growth Story Hits a Speed Bump

Analysts significantly lowered Uber’s bookings growth estimates after the company provided an update on March 19 on the impact of the COVID-19 crisis to their business. After the event, seven analysts revised their models with an average estimate of -8% for 2020 total bookings growth, down from 51% before the company provided an update.

Teleworking, social distancing and quarantines are causing the ridesharing market to deteriorate. In Seattle, Uber noted that rideshare bookings last week were down by 60-70% year-over-year, and similar curves are playing out in Los Angeles, San Francisco, New York City, Paris and London. In Hong Kong, ridesharing activity fell by 45% from its peak, but as of now, two months later, activity is still down by 30%. The company also noted that ridesharing activity in Latin America was insulated from the crisis, until last week when demand also began to fall.

Analysts left growth projections for Uber Eats largely unchanged as they benefit from an increase in demand for food delivery. According to Uber, the small business sales team is signing up 2.5x new restaurants per day, and website visits have increased by ten-fold, in part due to cross-selling Uber Eats on their ridesharing app.

Uber noticed it took Hong Kong approximately four to five weeks from lockdown to hit bottom before seeing a recovery begin. With this timeline playing out on a global scale, in different cities, starting at different times, their “best guess” for an overall bottom is sometime in 2Q20, but at this time, they do not feel comfortable updating their guidance without more clarity.

However, Uber is confident their variable cost structure will enable them to retain segment margins and a strong cash position under various crisis scenarios, a few of which they shared with investors. In one dire stress-case scenario, if ride bookings fell by 80% through year-end and never recovered, they expect to end 2020 with $4B in cash. If Q2 were to be the bottom, with recovery beginning in Q3, Uber plans to end the year with $6B in cash. Wall Street is now expecting Uber will end 2020 with nearly $6.9B in cash, according to a custom consensus from Visible Alpha of seven analysts that revised estimates since the company updated investors on March 19.

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