Despite poor earnings, Uber is 'making tons of money'

Chelsea Lombardo
Production Assistant

Shares of Uber (UBER) sank Friday after the company reported poor second-quarter earnings that missed on analysts' top line estimates. The ride-hailing company reported a massive $5 billion loss.

In its second-ever report as a publicly-traded company, Uber reported gross bookings of $15.76 billion, falling just shy of analysts’ expectations of $15.83 billion.

“Our platform strategy continues to deliver strong results, with trips up 35% and gross bookings up 37% in constant currency, compared to the second quarter of last year,” CEO Dara Khosrowshahi said in a statement.

Tom Essaye, publisher of daily market analysis The Sevens Report, told Yahoo Finance’s “The First Trade” that despite Uber’s disappointing results, he’s still optimistic about the company.

“The earnings definitely were mixed,” Essaye said. But, he said, “there's just so much money coming in, these guys will figure out how to make a profit. For longer-term investors, I'd be a buyer.”

Waiting for Uber to “eventually” turn a profit – as Khosrowshahi said it would on the earnings call – isn’t good enough for others.

A screen displays the company logo for Uber Technologies Inc. on the day of its IPO at the New York Stock Exchange (NYSE) in New York, U.S., May 10, 2019. REUTERS/Brendan McDermid

“I need something a little bit more tangible than that,” David Nelson, chief strategist at Belpointe Asset Management, said. “And what was really striking was the options expense, just enormous. How much is going out in stock option compensation? A lot of these companies are reporting earnings. When you dig down deep and you look at GAAP earnings... they're losing money.”

Uber reported a $5.24 billion net loss in the second quarter, though much of that was due to stock compensation following its May IPO.

Still, Essaye is a believer in the sharing economy, and says Uber is an important part of it.

Uber’s revenue – which was $2.87 billion in Q2, lower than expectations – is “enormous,” Essaye said, but acknowledged it is “disconcerting” when the CEO says “eventually we'll get to profitability.”

“But at the end of the day, Uber is not just static either, right? Uber is doing different things,” he said. “They are innovating, and it's really part of a new economy. So certainly, there are some warts on that earnings call. but over a longer term time frame, this is the way the economy's going. Uber is a first mover, and they have a technology advantage. I think that's worth something.”

Though skeptical about Uber’s stock potential, Nelson clearly sees value in the service it provides, saying: “I will admit I used it this morning.”

Chelsea Lombardo is a production assistant for Yahoo Finance. You can find more of her work here.

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