Uber Q1 Earnings Preview: Sales To Be Fueled By Bookings Rebound, Food Deliveries

• Reports Q1 results on Wednesday, May 4, before the open
• Revenue Expectation: $6.08 billion
• EPS Expectation: Loss of $-0.2718

The world’s largest ride-hailing service, Uber Technologies (NYSE:UBER), seems to be in good shape to recover from the pandemic-driven collapse in the travel business. Despite concerns that the Omicron variant could still hurt revenue, the San Francisco-based company has recently raised its earnings forecast, counting on a sustained increase in bookings. Uber shares closed on Tuesday at $29.47.

Uber Weekly Chart

Sales are expected to surge by more than $6 billion in the first fiscal quarter which ended in March, more than double the same period a year ago. At the same time, adjusted earnings before interest, tax, depreciation, and amortization should hover between $130 million and $150 million.

Those figures display the resilience of Uber’s post-pandemic rebound, as more people book rides after the economic reopening. Last quarter, the company posted better-than-expected earnings, with an 83% year-on-year revenue growth.

According to Chief Executive Officer Dara Khosrowshahi, gross airport bookings at the end of February were more than 50% from the previous month. The company expects the upcoming travel season to be one of the strongest ever.

In a recent filing to the SEC, CEO Khosrowshahi said:

“Whether for travel, commuting, or going out at night, we’re seeing healthy and growing demand across all use cases, highlighting just how eager consumers are to get moving again.”

Despite these positive trends, cost pressures are not subsiding and could hurt Uber’s margins in the busy summer period.

Uber aggressively spent last year on various incentives as part of its push to lure drivers back to work after the COVID-related disruptions. According to some analysts, that cost will continue to weigh on the company’s earnings. According to a recent note by the Bank of America:

“For 2Q, the risk is that Uber may need to add near-term driver incentives to adjust for positive demand recovery and gas prices.”

Meanwhile, Uber’s delivery business, including Uber Eats, continued to see strong demand, with an annualized run rate for bookings reaching an all-time high in February.

A Long-Term Pick

Some Wall Street analysts think that Uber stock is currently undervalued, given it's well-positioned to benefit from the economic reopening.

Uber Consensus Estimates

Source: Investing.com

According to the consensus estimate of 46 analysts surveyed by Investing.com, over the next 12 months, Uber shares have a 98.77% upside potential from their current level.

While reiterating Uber stock as a buy, Needham said in a recent note that it likes Uber’s “balance” of growth and profitability. Its note said:

“Our top Long picks are UBER (Buy, Conviction List, $68 PT), where we like the balance of growth and profitability trading at an attractive adj. EBITDA multiple.”

The Bank of America, in a recent note, reiterated its bullish position on the stock:

“We remain constructive on Uber as we think valuation reflects ongoing uncertainty on driver supply and take rates, and we still expect a strong travel/mobility recovery this summer.”

Bottom Line

In the post-pandemic environment, Uber faces cost pressures in the shape of higher wages and escalating fuel costs. But despite these challenges, the company is in an excellent position to take advantage of higher mobility demand. Today’s earnings report will likely reflect these trends.

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