Uber loses $543,478 every hour

Tuesday, November 5, 2019 by Robinhood Snacks | Disclosures

Uber figuring out how to make money before its 2021 graduation

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Hey Snackers,

New game: Match Facebook's new quasi-rainbow logo colors to the apps that it owns. Go.

Markets climbed to fresh record highs on a heavy Monday serving of earnings. The top 2 were ugly (more on that below).

Worn
1. Under Armour plummets after an accounting investigation (sneakers are the real issue)

Protect this house... from a federal investigation. While Under Armour was busy wicking sweat, the WSJ discovered that SEC investigators are questioning people at its Baltimore office about its accounting practices. The question is whether UA shifted around numbers to strategically make sales appear stronger than they really are.

  • 2.5: That's how many years the investigation has been going on, according to the report.
  • 0: That's how much info Under Armour has told the public about this ongoing investigation. If execs don't think it's material to the stock, they don't have to disclose it. So they didn't.

Coach always said "Talk is cheap"... Except when it reveals fundamental issues about your business. Take these 2 soundbites from Under Armour's earnings call:

  • “So now we’re focused on 2020 and beyond.”
  • “The next chapter” was mentioned multiple times.
  • If you had a 3rd quarter like Under Armour's, you'd want investors looking to the future too.
THE TAKEAWAY

Under Armour stock plummeted 18% because its core biz is the real issue... While your wardrobe trended athleisure, Under Armour doubled-down on more "ath," less "leisure." CEO/founder Kevin Plank just gave up his role to become the brand chief, dedicated to make Under Armour even "louder." Now we're seeing how that injures UA:

  • Its home market: Sales in North America fell 4%. That was offset by 5% growth internationally, but sales for the entire company shrank over the past year by 1%.
  • The core product of sports apparel: Sneaker sales dropped 12% – and if you can’t do sneakers, can you really take on Nike?
Losses

Losing $543K per hour... Think about that. One time you lost nana's birthday check and you were inconsolable. Uber just told investors everything about its 3rd quarter, but it's hard to not focus on the $1.2B it lost. After losing $5B the previous quarter (that was higher because of one-time IPO costs), Uber's on pace to lose $8B this year. $8 billion.

It's Uber vs. Everybody... Investors piled into Uber for years with the hope it would become like Amazon — an unstoppable giant — but for transportation. In reality though it has enemies. Everywhere:

  • Competition: Lyft rose from the ashes of Uber’s scandals. Delivery apps are all over your phone. And self-driving car companies could unleash self-driver not-Uber fleets before Uber.
  • Politicians: California's new law could make Uber even more unprofitable by forcing it to pay drivers actual wages and benefits.
  • Restaurants: Yup, spots like Bareburger get 20% of their sales from delivery apps — but they're fed up with paying away 15% of those sales as fees to Uber Eats and its delivery rivals. The CEO calls the apps "a necessary evil" that he hopes to be rid of by next year.
THE TAKEAWAY

Uber prefers you look at its sales growth instead... If you do, you're impressed by rides (revenues up 20%), Eats food delivery (+71%), and Freight (+81%!). Here's the problem: Uber's paying for all that growth. Competition forces it to dish out discounts and promo codes Oprah-style. So it's pledged to change things... in 2 years:

  • 2021: That's the magical year when Uber CEO Dara Khosrowshahi says it'll become profitable. Funny — that's also when Lyft said it will stop destroying money and start making it, too.
What else we’re Snackin’
  • Neighbors: Apple will drop $2.5B on housing initiatives to make its Bay Area home more affordable (Facebook and Google made similar but smaller pledges earlier this year)
  • Tap-back: SoulCycle launches "Retreats" to compete with Peloton — destination spinning you've got to travel for in order to "reconnect with the natural environment"
  • Named: Microsoft is launching a new web browser and search on January 15th and the name has Google-ish vibes: "Chromium Edge"
  • Control-Z: Twilio has to re-issue its earnings report because it got the math wrong
  • Pumped: Saudi Aramco will now IPO in Saudi Arabia, targeting a record $2T (trillion with a "T") valuation, which would officially make it the world's most valubale company
  • Carbs: Papa John's is whipping up a new garlic Parmesan-flavored crust, its first new crust in almost 40 years
Snacks Daily Podcast

Walmart just unveiled curbside alcohol pickup across 2,000 stores — it's the chain's plan to own your entire grocery budget... and beat Amazon on value since it can't beat them on price.

Tuesday

Disclosure: Authors of this Snacks own shares of Amazon

ID: 1002945

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