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Uber Q2 Earnings Preview: Driver Shortage Threatens Business Revival 

By Investing.com (Haris Anwar/Investing.com)Stock MarketsAug 03, 2021 01:15PM ET
www.investing.com/analysis/uber-q2-earnings-preview-driver-shortage-threatens-business-revival-200595579
Uber Q2 Earnings Preview: Driver Shortage Threatens Business Revival 
By Investing.com (Haris Anwar/Investing.com)   |  Aug 03, 2021 01:15PM ET
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  • Reports Q2 results on Wednesday, Aug. 4, after the market close
  • Revenue Expectation: $3.7 billion
  • EPS Expectation: loss of $0.54

Uber Technologies (NYSE:UBER) is finding itself in a tough spot these days. While its ride bookings are coming back as the economy reopens, the world’s largest ride-hailing service is struggling to win back drivers in the post-pandemic environment.

Analysts, on average, expect the San Francisco-based Uber to report $3.74 billion in sales, up more than 20% from the previous quarter and 39% more than the same period a year ago.

Uber Weekly Chart.
Uber Weekly Chart.

This strong rebound comes after bookings collapsed last year when the rapid spread of the COVID virus forced governments to institute and enforce lockdowns, along with mass closures of businesses and offices.

But as UBER's rides segment comes back, its business equation isn't the same. The transportation services tech platform is spending more on recruiting drivers now and that means wider losses and a longer time until the company sees a profit.

Bonuses and other incentives to get drivers back on the road will reduce Uber's rate taken from fares by about 20% this quarter, the company told investors in May. Uber Chief Executive Officer Dara Khosrowshahi has set a goal for the company to turn a quarterly adjusted profit by the end of the year.

During lockdowns many drivers took other jobs or stayed home when the coronavirus wiped out ride-hailing demand. In April, Uber said it would spend $250 million on bonuses and other recruitment incentives.

Shares Under Pressure

That situation has kept Uber shares under pressure this year. Its stock has fallen 13% during the same period in which the NASDAQ 100 Index gained about 14% year-to-date. UBER shares closed Monday at $43.49.

Adding to the situation: the labor crunch outlook isn’t projected to end any time soon. The problem will persist through the third quarter, according to a Wall Street Journal report, further pressuring Uber and its main rival, Lyft (NASDAQ:LYFT). Both will have to deal with shifting dynamics of gig labor that they acknowledge will require long-term solutions.

“This is a moment of deep introspection and reflection for a company like ours to pause and say, ‘How do we make the proposition for drivers more attractive longer term?'” Carrol Chang, Uber’s chief of driver operations for the U.S. and Canada, said in the report. “It is absolutely a reckoning.”

Another important aspect of Uber’s business transformation during the pandemic was its delivery business, which the company quickly expanded from meals to booze, groceries, packages and prescriptions. Tomorrow’s results will provide some insight into whether consumers will continue to stick with UberEats after the pandemic.

Delivery revenue surged during the pandemic, providing crucial support when Uber’s ride-hailing services struggled. These sales rose another 28% in Q1 from the prior quarter to $1.7 billion. That’s more than triple what it was a year ago.

Bottom Line

There is significant uncertainty surrounding the ride-hailing business model in the post-pandemic environment. Uber has to show that it’s able to overcome labor shortages without significantly increasing its costs, while proving it can sustain growth in its delivery business.

Uber Q2 Earnings Preview: Driver Shortage Threatens Business Revival 
 

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Uber Q2 Earnings Preview: Driver Shortage Threatens Business Revival 

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Comments (5)
Benjamin Douglas
Benjamin Douglas Aug 05, 2021 12:08PM ET
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Uber is totally untruthful, 9 out of 10 rides results in them taking more than half of what the customer has paid. I’ve done the after ride with customers and they pay 80-100 and I’m getting 35-40.
Haris AD
Haris AD Aug 03, 2021 11:17AM ET
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Uber is sucking both customers and drivers blood. Thier fees is now 45/50% now days. This means they take 50% of the fare. The drivers are working buying gas and cars but Uber takes the money. This is a shame how people wants to get super rich by ripping peoples pockets.
Curtis Edwards
Curtis Edwards Aug 03, 2021 11:17AM ET
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Welcome to America...just in case you are NEW to this business model/con job.Capitalism enslaves workers, while having them THINK they are free...lol
Isaac Amos
Isaac Amos Aug 03, 2021 11:09AM ET
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Isaac Amos
Isaac Amos Aug 03, 2021 11:09AM ET
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Masum Billa
Masum Billa Aug 03, 2021 11:02AM ET
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