(Reuters) - Shares of Uber Technologies Inc (UBER.N) rose on Friday after the ride-hailing company laid out an ambitious plan to be profitable by the end of 2020, a year ahead of its previous target as it tries to squash Wall Street doubts over its long-term viability.
FILE PHOTO: File photo: The company logo for Uber Technologies Inc is seen at the New York Stock Exchange , May 10, 2019. REUTERS/Brendan McDermid/File Photo. RB
Uber shares, which were down almost 50% percent at the end of last year from its public launch, jumped 7% in trade before the bell as investors were also smitten by the company’s aggressive plan to cut costs.
Chief Executive Officer Dara Khosrowshahi is also aiming to bring in more repeat-customer business and try to increase use of premium ride services.
“We give Uber (and its board) major credit for finally listening to investors and putting the brakes on its 1980’s Rock Star-like spending habits,” brokerage Wedbush Securities said.
Khosrowshahi has been trying to change the company’s image since replacing co-founder Travis Kalanick in 2017 after a series of complaints over his behavior.
“(We) believe the focus on quality bookings shows discipline as Uber emphasized the era of growth at all costs is over,” analysts at JP Morgan said.
At least 10 brokerages raised price targets after Uber posted quarterly results that beat estimates.
Shares are up at $39.51 in pre-market trading.
Still, some analysts remained skeptical about Uber’s investments in the highly competitive food delivery market, which it moved into just a few years ago.
Eric Ross, an analyst at Cascend Securities, said he preferred the stock of Uber’s smaller ride-hailing competitor, Lyft Inc (LYFT.O) because it does not invest in expensive side projects.
Uber has vastly diversified its business over the past five years.
While the company has pulled out of food delivery in some major emerging markets to cut costs, it is also developing self-driving cars, working on long-haul trucking operations and even planning commercial passenger drone shuttles.
Uber is also facing regulatory probes over the classification of its drivers for its Rides business as freelancers when they are effectively working full-time for the company and still expects a loss of more than $1 billion this year.
Reporting by Neha Malara, Aakash Jagadeesh Babu and Jasmine I S in Bengaluru; Editing by Bernard Orr
The board of directors unanimously accepted Thiam's resignation at a meeting on Thursday, appointing Credit Suisse(CS) veteran Thomas Gottstein as the new CEO, the Swiss investment bank said in a statement Friday.
Last year, Credit Suisse's ex-chief operating officer, Pierre-Olivier Bouée, was implicated in two separate spying operations, one involving the former head of wealth management Iqbal Khan. Khan had defected to crosstown rival UBS andBouée reportedly feared that he might try to poach Credit Suisse employees and clients. The bank said he had ordered the surveillance to protect its interests.
Bouée stepped down after that operation came to light. More recently, he was blamed for ordering a spying operation on Credit Suisse's former head of human resources for several days last February.
"I had no knowledge of the observation of two former colleagues. It undoubtedly disturbed Credit Suisse and caused anxiety and hurt. I regret that this happened and it should never have taken place," Thiam said in the statement.
Thiam will step down following the presentation of 2019's fourth quarter and annual results next week.
Credit Suisse said previously that former COO Bouée had not informed Thiam or any other member of the bank's senior leadership of the surveillance on Khan. It added in December that it found no indication that Thiam and other members of the executive board or board of directors knew anything about the second spying case until the media reported on it.
Bouée and Thiam worked closely together for nearly two decades at various firms before joining the Swiss bank, according to their Credit Suisse biographies. The pair were at McKinsey in Paris between 2000 and 2002. Bouée followed Thiam to British insurer Aviv (AVVIY)in 2004. They both joined Prudential, another British insurer, in 2008 before heading to Credit Suisse in 2015.
Shares in Credit Suisse lost as much as 5% in Zurich on Friday, before trading about 2.5% lower.The stock has fallen 46% since Thiambecame CEO, reflecting a challenging period for European banks, which have had to contend with fallinginvestmentbanking revenue and the impact of record low interest rates on lending margins. Shares in major rival UBS(UBS)have droppedabout 40% over the same period.
Thiam was a surprising choice to lead the bank.He had no direct investmentbanking experience and was an outsider to the closeted world of Swiss finance. At the time, Credit SuisseChairman Urs Rohner cited his experience in wealth management, which has become a much bigger focus for European banks as they tried to offset the investment banking decline and the impact of negative rates.
Under Thiam, Credit Suisse implemented a three-year drive to focus on managing the assets of wealthy clients, scale back investment banking and restructure its global markets business. Analysts say the bankstill needs to do more to shift its resources away from investment banking in New York and London to wealth management in Asia.
Credit Suisse posted a $3 billion loss in its 2015 financial year. Those losses narrowed in Thiam's first years in charge before the bank returned to profit in 2018. On Friday, Rohner credited Thiam with returning the bank to profit and placing it "on a very solid foundation."
Still, Credit Suisse has now handed the reigns back to an insider. Gottstein has been with the bank for more than two decades and has worked in the industry for more than 30 years.He has been responsible for the bank's Swiss businesssince 2015, Credit Suisse said.
In Friday's statement, the bank's lead independent director Severin Schwan said Rohner had led the board "commendably during this turbulent time."
"After careful deliberations, the Board has been unanimous in its actions, as well as in reaffirming its full support for the chairman to complete his term until April 2021," Schwan added.
Employers added 225,000 jobs in January and the jobless rate was 3.6%, signs that the U.S. labor market is positioned to fuel economic growth in 2020.
Wages increased 3.1% from a year earlier, a touch higher than December’s annual rise of 3%.
Economists surveyed by The Wall Street Journal had forecast job growth of 158,000, an unemployment rate of 3.5% and year-over-year wage growth of 3.0%.
January’s robust payroll gain points to a continued healthy labor market in a U.S. economic expansion now in its 11th year. Over the past three months, the U.S. economy added an average 211,000 jobs. Job growth was revised higher in the last four months of 2019.
Robert Jones, president of American Sale, an Illinois-based retailer of home-recreation goods such as trampolines and hot tubs, said his company will add more workers this year. He expects a low unemployment rate and solid economy to help spur spending on big-ticket items.
“When you have more demand, you have more to do, so you just need more people,” Mr. Jones said.
A strong labor market should help propel the broader economy, which was expanding at a moderate pace as 2019 came to a close.
In recent weeks, new risks have emerged particularly for the manufacturing sector.
Boeing Co.halted production of its troubled 737 MAX aircraft, an impediment to manufacturing output that is expected to reduce first-quarter U.S. growth. The coronavirus outbreak that originated in China could hinder a rebound in global manufacturing activity.
In January, manufacturers cut jobs. Meanwhile, industries including construction, health care and transportation and warehousing added jobs at a strong pace.
SHARE YOUR THOUGHTS
Did your pay change this year? How so? Join the conversation below.
Historically low unemployment hasn’t translated into an acceleration in wage growth. Average hourly earnings increased by 7 cents last month to $28.44. Wages were up 3.1% from a year earlier. Pay has grown at an annual pace of 3% or higher for 18 consecutive months.
Wage growth is one factor that influences Americans’ desire to seek work.
The share of Americans working or looking for work ticked up in January to 63.4% from 63.2% in December. The so-called labor-force participation rate has remained steady in recent years, defying economists’ expectations for the retirement of baby boomers to drag down the rate.
Annual revisions released Friday showed the overall employment level for March 2019 was revised down by 514,000 jobs to 150.28 million. For all of 2019, employers added 2.096 million jobs, a downward revision of 12,000.
Enlarge/ Uber CEO Dara Khosrowshahi in December 2019.
Scott Heins/Getty Images
Uber announced on Thursday that it lost $1.1 billion in the fourth quarter of last year. As I said last quarter, this wasn't a surprise. After all, Uber lost $1 billion in the first quarter of 2019, a lot more than $1 billion in the second quarter (though most of it was one-time charges related to Uber's IPO), and $1.1 billion last quarter. Uber has been burning cash at about this rate since at least 2017.
The losses might seem endless, but CEO Dara Khosrowshahi says that the end is actually in sight. The company previously said it was aiming for profitability in 2021. In a Thursday conference call with investors, Khosrowshahi said that Uber was actually on track to turn a profit even earlier: by the fourth quarter of this year.
Could Uber really reach profitability so quickly after years of 10-figure quarterly losses? Uber management has always argued that the situation was temporary—that big losses were driving Uber's rapid growth and would turn into profits once Uber's growth leveled out.
This argument has more merit than it might appear at first glance. Uber really does face a tradeoff between growth and profitability. Until now, the company has leaned heavily on the growth side of the scale, regularly offering big discounts to attract more customers. If it simply stops doing that, it will do wonders for Uber's cashflow.
A good illustration of this point is the contrast between Uber's original rides business and its newer Uber Eats service. Rides grew just 20 percent (adjusting for currency changes) between Q4 2018 and Q4 2019, which is slow compared to Uber's early years, and slightly slower than last quarter. And at least on an EBITDA (earnings before interest, taxes, depreciation, and amortization) basis, the rides business is profitable. It earned $742 million in the last three months of 2019—more than last quarter's figure and a lot more than the $195 million Uber earned in the same quarter of 2018.
By contrast, Uber Eats is still growing rapidly, with gross bookings rising 71 percent (again, adjusting for currency fluctuations) between Q4 2018 and Q4 2019. But that rapid growth has come with massive losses: Uber says Eats lost $461 million (again, on an EBITDA basis) in Q4 2019. That's a remarkable figure because Uber's Eats revenue (excluding money that went straight to restaurants or drivers) was only $734 million. In other words, Uber lost more than 60 cents on every dollar of Eats revenue it took in.
So the case for optimism about Uber is that the company's cashflow will naturally improve as its growth levels off. With ride-hailing near saturation in many markets, it no longer makes sense for Uber to heavily subsidize rides. As the company has cut back on subsidies, the rides business has naturally gotten more profitable. Perhaps that trend—less growth but more profits—will continue in the rides business in the coming quarters. And perhaps Uber Eats is on a similar trajectory—just a year or two behind. As the meal delivery business saturates, Uber will stop offering big discounts there, too. That will naturally make the service—and perhaps Uber as a whole—more profitable.
One thing that's clear is that Uber is in no danger of running out of money. Uber says it has $11.3 billion in cash and short-term investments—enough to continue at its current burn rate for almost three years.
Investors seem to find Khosrowshahi's new profit target credible; the stock has risen about six percent in after-hours trading since Uber released its financial results.
The board of directors unanimously accepted Thiam's resignation at a meeting on Thursday, appointing Credit Suisse(CS) veteran Thomas Gottstein as the new CEO, the Swiss investment bank said in a statement Friday.
Last year, Credit Suisse's ex-chief operating officer, Pierre-Olivier Bouée, was implicated in two separate spying operations, one involving the former head of wealth management Iqbal Khan. Khan had defected to crosstown rival UBS andBouée reportedly feared that he might try to poach Credit Suisse employees and clients. The bank said he had ordered the surveillance to protect its interests.
Bouée stepped down after that operation came to light. More recently, he was blamed for ordering a spying operation on Credit Suisse's former head of human resources for several days last February.
"I had no knowledge of the observation of two former colleagues. It undoubtedly disturbed Credit Suisse and caused anxiety and hurt. I regret that this happened and it should never have taken place," Thiam said in the statement.
Thiam will step down following the presentation of 2019's fourth quarter and annual results next week.
Credit Suisse said previously that former COO Bouée had not informed Thiam or any other member of the bank's senior leadership of the surveillance on Khan. It added in December that it found no indication that Thiam and other members of the executive board or board of directors knew anything about the second spying case until the media reported on it.
Bouée and Thiam worked closely together for nearly two decades at various firms before joining the Swiss bank, according to their Credit Suisse biographies. The pair were at McKinsey in Paris between 2000 and 2002. Bouée followed Thiam to British insurer Aviv (AVVIY)in 2004. They both joined Prudential, another British insurer, in 2008 before heading to Credit Suisse in 2015.
Shares in Credit Suisse lost as much as 5% in Zurich on Friday, before trading about 2.5% lower.The stock has fallen 46% since Thiambecame CEO, reflecting a challenging period for European banks, which have had to contend with fallinginvestmentbanking revenue and the impact of record low interest rates on lending margins. Shares in major rival UBS(UBS)have droppedabout 40% over the same period.
Thiam was a surprising choice to lead the bank.He had no direct investmentbanking experience and was an outsider to the closeted world of Swiss finance. At the time, Credit SuisseChairman Urs Rohner cited his experience in wealth management, which has become a much bigger focus for European banks as they tried to offset the investment banking decline and the impact of negative rates.
Under Thiam, Credit Suisse implemented a three-year drive to focus on managing the assets of wealthy clients, scale back investment banking and restructure its global markets business. Analysts say the bankstill needs to do more to shift its resources away from investment banking in New York and London to wealth management in Asia.
Credit Suisse posted a $3 billion loss in its 2015 financial year. Those losses narrowed in Thiam's first years in charge before the bank returned to profit in 2018. On Friday, Rohner credited Thiam with returning the bank to profit and placing it "on a very solid foundation."
Still, Credit Suisse has now handed the reigns back to an insider. Gottstein has been with the bank for more than two decades and has worked in the industry for more than 30 years.He has been responsible for the bank's Swiss businesssince 2015, Credit Suisse said.
In Friday's statement, the bank's lead independent director Severin Schwan said Rohner had led the board "commendably during this turbulent time."
"After careful deliberations, the Board has been unanimous in its actions, as well as in reaffirming its full support for the chairman to complete his term until April 2021," Schwan added.
The board of directors unanimously accepted Thiam's resignation at a meeting on Thursday, appointing Credit Suisse(CS) veteran Thomas Gottstein as the new CEO, the Swiss investment bank said in a statement Friday.
Bouée stepped down after that operation came to light. More recently, he was blamed for ordering a spying operation on Credit Suisse's former head of human resources for several days last February.
"I had no knowledge of the observation of two former colleagues. It undoubtedly disturbed Credit Suisse and caused anxiety and hurt. I regret that this happened and it should never have taken place," Thiam said in the statement.
Thiam will step down following the presentation of 2019's fourth quarter and annual results next week.
Credit Suisse said previously that former COO Bouée had not informed Thiam or any other member of the bank's senior leadership of the surveillance on Khan. It added in December that it found no indication that Thiam and other members of the executive board or board of directors knew anything about the second spying case until the media reported on it.
Bouée and Thiam worked closely together for nearly two decades at various firms before joining the Swiss bank, according to their Credit Suisse biographies. The pair were at McKinsey in Paris between 2000 and 2002. Bouée followed Thiam to British insurer Aviva(AVVIY) in 2004. They both joined Prudential, another British insurer, in 2008 before heading to Credit Suisse in 2015.
In Friday's statement, the bank's lead independent director Severin Schwan said Chairman Urs Rohner had led the board "commendably during this turbulent time."
"After careful deliberations, the Board has been unanimous in its actions, as well as in reaffirming its full support for the chairman to complete his term until April 2021," Schwan added.
