In this post, we’re going to do a case study.
Today’s stock of the day that we’re going to check out is Uber.
Let’s check it out, see how it’s doing and give you some insights behind it.
There’s a lot of people that are interested in investing in Uber.
It’s a very popular company – something that you use on your cell phone quite often and frequently. That’s the case, especially if you don’t have a car.
I know that over the last couple of years, it’s continued to gain some ground popularity and momentum. Even my mom started using Uber and Lyft not too long ago.
What I want to share today with you is a little more insight into the stock. We’re going to talk about what’s going on and what’s happening. Maybe you should invest in it; perhaps you shouldn’t.
I’ll give you my take and give you some insight and maybe a plan of action or some things to think about.
- What in the world is Uber?
It’s an application (a software company) where you get deliveries; it’s a taxi cab. You could get a ride-sharing to go somewhere.
But it’s a fairly new company as far as the IPO is concerned.
Currently, as of recording this video, the stock price is right around $28 or so per share. When you look at this company, it is fairly new, and this is why it’s attractive.
That’s because with such a new company it gives you the good potential for skyrocketing returns. Unfortunately, the stock hasn’t been doing well.
And you can see what happened. We hit the IPO; we’ve launched, stocks traded a little bit sideways, had a few little pops here and there.
But overall it’s been going down. But what people are interested in is the performance of it. How’s it going to go?
Is it going to be something like Facebook where, after a little bit of time, maybe a down movement just like Facebook had over here.
Will we get that rising trend over the next few years?
That’s what people are interested in.
And if you look at Wix, you can see the same thing.
You had an initial IPO stock went sideways a little bit down and then continued to move higher.
If you look at Shopify, you can see very similar sideways action and then continued.
That’s the big question when it comes to Uber. Is this going to happen with Uber?
And that’s what people want to know. When you look at this, you have to recognize that just searching for “is Uber company profitable” there’s a lot of different reports.
You can dig deeper into the SEC filings here, which we will get into in just one second.
Uber is not a profitable company. You can see a report of an operating loss of over $3 billion. That’s a huge sum and quite a lot of losses when you’re looking at it.
Also, when you’re looking at other companies that are invested in Uber, you can see PayPal invested in Uber, which triggers them a huge write-off of 228 million dollars. It didn’t payout for PayPal to invest in Uber.
One of the ways that the company is trying to stay profitable is by doing layoffs. It’s the cheapest way to cut costs, but sometimes it doesn’t work out for the best because now you don’t have employees that help you out to build the company and make it better.
When you look at this, you can see Uber announces another round of layoffs.
This is the way that companies stay profitable because now they are able to appeal to their shareholders. Meaning they’re able to hit their profits a little bit better quarter after quarter. What’s the easiest way?
Well, you could cut the employees.
You could Uber let go of 400 people from the marketing team. Because I mean the app is already made. I mean, how much more development is there.
It works, right?
There’s maybe a few glitches here and there, but what you need is exposure. You need more people taking rides. You need different types of rides. You need that service sector to continue, and you need more drivers.
This is how you make more money.
You can see they’re continuing to do cuts to hit their shareholder needs and profitability.
What they’re trying to do is cut costs so that they could show better on their earnings reports and their profits. That’s the bottom line. That’s what investors want to see. They want to see the company is profitable.
They don’t care about the employees.
When you look at their filings, here’s a fascinating thing to take a look at.
Go to the Uber website here, which a lot of people don’t do.
You can see here’s a quarterly report. You could get the SEC reports, which we’ll check out in just one second.
Look at the SEC filings right here, and you look at the PDF documents. These people who own a large amount of shares or maybe are part of the company they have to disclose what’s going on and what’s happening.
And what is it that they’re doing.
What the heck does this form mean?
Well, it means that the U.S. security exchanging commissions in DC shows the statement of changes in beneficial ownership of the security.
In this case, this person went ahead and divested right so here let’s zoom in so you could check it out.
Are you acquiring or disposing of the stock. And you can see reported transactions right here. It’s not a small amount. You can see they’re divesting, disposing of these kinds of things. They’re getting rid of their shares at a certain stock price.
And you can see it right there. There is the amount, the price that they got rid of it at. And the amount of shares and so forth. You could see direct or indirect.
You could go through this document. But this is what you’re interested in because if these people who own a large amount of shares are getting rid of these things, well, that’s bad news.
Of course, they have to disclose this. I’m not saying that just because they’re saying these things that all of a sudden it’s a bad company. Sometimes people own a large amount of shares, and then they have to get rid of it. I’m cashing out, right.
Here they’re not acquiring shares. When a company is profitable, and when people who are working in the company and they’re interested in the company, and they see big growth, they acquire more of the company.
And that’s ultimately what you usually do. But here just looking at a bunch of these, you can see they’re getting rid of the shares. They’re disposing of the shares. That’s one thing to be cautious about and a red flag honestly.
If the owners or people who are working in the company or people who have to disclose things they’re getting rid of the stock – something just doesn’t look right.
If you look at the current level, one kind of triggers and the market cap is huge.
And there’s a lot of volume obviously, so the volume traded is also quite big. It’s a very popular company but is it popular enough and worthwhile enough to invest in?
Is it going to make you money?
That’s an interesting question. Look at the s-1 revenue of the growth and losses. The company noted that $3.2 billion was gained from divestitures. What does that mean?
Well, it’s not investing. It means divesting, which means they’re selling off the investments that they had. Otherwise, the company would have been at a loss. That’s the interesting part.
It’s not looking good. You can get these s1 things at SEC.gov so that you can look up the company. As you check these things out and you start scrolling, there’s a lot of details here. You could spend tons and tons of time reading these things.
That’s what Warren Buffett does. But it gives you a breakdown. It’s almost like a little mini-book on the company of what happened this quarter and so on.
The government requires this. Anyways, long story short, you could dig deeper into all this. They have all kinds of things.
Things like:
- What are they looking to do in the future
- What’s the right company motto
You can get into a lot of the documents. You can see the revenue 2016, 2017, 2018, and it looks and continues to increase, which is also good.
2018 looks a little bit better, but still, that company is struggling. That’s because, by the time you pay taxes and other expenses, they’re trying to make these reports look good.
Well, shipping companies will pre-ship things a quarter in advance so that way we could put that on our balance sheet. In that case, our earnings look better for this quarter.
What do they do next quarter?
You’re constantly playing catch-up, and this is the cycle that continues to run. But they’re dealing with billions of dollars and eventually that steam runs out. And they have to either catch up either at Christmas time or make a loss in one of the quarters.
This is what goes on behind the scenes. They got rid of their employees in some areas (the marketing team).
When you do that, you’re pretty much eliminating your workforce. But it allows you to save a lot of money.
They also talked here about EBITDA, which is net income, excluding income from discontinued operations.
There’s a lot of definitions they show you right there.
At the end of the day, this is what some of the financial guys look at.
You could read all these things, and you can see charts, graphs, but at the end of the day what’s the big question?
When I look at Uber, I want to see a growing company.
And in this case, you don’t have to be a rocket scientist.
You just pick one of the oldest or most recent price points and put the current price point where it is now.
And is it moving up, or is it moving down?
Right now, it’s moving down.
Once this company starts becoming profitable, you’ll know. That’s because if you’re following the chart, what’s going to happen is this is going to turn and reverse course slowly.
The big boys are going to know. You don’t have to be the first guy in there.
Let me ask you a big question.
If this stock goes to $200 a share, is it going to matter if you got in it at $30 a share or $33 or share or $36 a share?
No, it’s not going to matter. The thing is if you’re looking at this one and you’re interested investing for the long haul right now the trend is down.
What do you want to see?
I’d love to see as a base for a little bit and then eventually roll to the upside.
If you get certain pullbacks and you’re moving a little bit sideways right here. And then it comes up, and it comes down. And then starts making these higher lows.
You can see there’s a higher low and another higher low. And it continues on that trendline – that’s a good thing to see. And that’s when you want to get into the stock.
In the meantime, the trend is down. Do you think this could end up being like a GoPro? This stock had its days, and it looks good at the beginning. But now it’s flatline.
That’s my thought on Uber. I don’t think it’s a great investment right now. But if things turn around and it becomes more profitable, it could be a good investment in the future.
But do you have to get in it right now? No, not necessarily. What’s the rush. Be patient and allow things to set up in your favor.
