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Stock Analyst Update

Uber's Delivery Demand Stays Strong, Mobility Suffers

We are maintaining our fair value estimate for the narrow-moat company and view shares as attractive.

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Uber (UBER) reported mixed second-quarter results as revenue came in above FactSet consensus estimates while operating losses were higher than expectations. The firm continues to benefit from its relatively diversified revenue base, with the delivery segment (previously Uber Eats) helping offset weakness in the mobility segment (previously Rides). While some countries are showing signs of improvement, we remain doubtful about a quick recovery in mobility demand amid fluctuating waves of coronavirus infection. In the meantime, growth in delivery and the implementation of cost controls should help the firm to progress toward profitability. We think the firm’s network effect moat source remains intact as the delivery segment generated growth in diners, orders per diner, and gross sales per restaurant. According to Uber, improvements in mobility demand in July didn’t hurt demand for delivery services. We have lowered our projections due to further uncertainty regarding the mobility segment, but our fair value estimate remains $48. While the stock has come up 135% from its March lows, it remains 4-star-rated.

Total gross booking during the quarter declined 35% year over year, driven mainly by the 75% decline in mobility and partially offset by 106% growth in delivery. Uber’s overall adjusted take rate dipped 130 basis points from last year as revenue shifts to the lower-take delivery business. Total revenue of $2.2 billion was down 29% from last year. Uber’s monthly active platform consumers, or MAPCs, declined 44% from last year to a mere 55 million as demand for mobility declined due to the pandemic. However, with strong growth in demand for delivery, Uber’s MAPC monetization went up 27% from last year.

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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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