Uber Porspects!

Dear Reader,


Here I am going to explore the prospects of Uber Technologies, Inc. the ride hailing application owner.

Uber is the leader in the market for getting  an automobile ride with independent drivers, followed by Lyft. Uber's main business, ride hailing, is not growing so fast anymore, so Uber is trying to diversify into food and freight delivery, but these two businesses do not make a large enough portion of Uber's revenue for now.

The problem with Uber is that Uber is losing a lot of money. Just in the last reported quarter, ending 30.09.2019 Uber reported 1.16 USD billion loss which makes 30.47% negative net profit margin. Basically, as with many very early stage technology companies Uber's outcome is binary. If Uber continues to grow its revenue strongly and ultimately reports net profit, Uber will survive and prosper. However, if Uber continues making such staggering losses Uber's survival as a viable business might come into question.

Uber is a discounter. It is offering its taxi like service for much under the going taxi rates. Netflix did something like that - a classic discounter strategy. You are using dumping to get a huge market share, become a monopolist and then gradually start raising prices. The problem with Uber is that its model is heavily dependent on government regulation as evidenced by the ban on Uber to offer its services in London, the world's premier financial center.

In my personal opinion, the coming global economic recession in 2021/2022 will be the true test whether Uber will survive. If Uber in the next 2-3 years starts making money(clocking in net profit) Uber will survive. Otherwise Uber can go bankrupt. Personally, I still think Uber is overvalued by 15% at current market conditions.

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Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.

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Respectfully yours,

Petar Posledovich