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Uber is going to be one of the most popular IPOs since Facebook listed in 2012. They will list on Thursday May 9! 

DISCLAIMER: Cheeky Investor is an independent company that provides an information service. The content in this presentation is not advice. There is no explicit or implied endorsement of any particular companies, products or strategies. The information presented here is intended as a general overview and no responsibility can be taken for any change in the personal circumstances of any person acting on this information. You are advised to discuss your personal situation with your Financial Planner, Accountant or other industry professional. This presentation is not intended as a technical training, but will make you aware of the issues that you need to consider when deciding if or when managing your finances. We are not licensed financial planners or stock brokers. This page is purely for information and entertainment purposes.

What We Know

Uber plans on selling 207 million shares between $44 to $50 each. If this falls closer to the $50 mark, the company would raise $9bn in total.

In terms of the valuation, Uber would be valued at the $90bn mark. These numbers are extraordinary and would place them in the top 3 IPOs in the last 10 years.. Here’s how they would rank

Alibaba – Raised $25bn at a valuation of $167bn in 2014 (Now valued at $470bn)

Facebook raised $16bn with a valuation of $104bn in 2012 (Now valued at $541bn)

Uber raising $9bn with a valuation of $90bn

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The Impact of Lyft

Earlier this year Uber’s major competitor Lyft listed on the stock market. The company is currently trading 20% below its IPO price. Uber has acted by coming in at a lower valuation than first anticipated.

  • Late last year before the Lyft IPO, investment bankers were valuing Uber around the $120 billion mark.
  • Just a few months ago, Uber suggested to some investors that the valuation would be closer to $100bn.
  • Now this number seems to be closer to $90bn

A Look at Uber’s Numbers

As with a lot of high growth companies looking to IPO, the numbers are a little interesting.

Uber makes it money by taking a 20% to 25%  cut from trip fees. Meaning that an increase in sales/trips means an increase in expenses.

In 2018, Uber had revenue of $11.3bn, up from $7.9bn in 2017. A few analysts have predicted 2019 revenue to be $13.5bn representing a 19.5% increase.

However, in 2018 Uber posted a loss of $3bn with an expectation of losing $3.7bn in 2019 and $3.5bn in 2020.

The company is  diversifying revenue streams through new mobility rides, Uber eats and freight shipping. In fact, Uber Eats hit $1.5bn in revenue for 2018, almost tripling the previous year of $587m.

Non-Financial Numbers

As of 2018, Uber had 91 million active customer. A significant increase from 68 million a year earlier. These customers completed some 5.2 billion trips in 2018. This includes Uber car pooling and Uber Eats.

From a user acquisition point and trips point of view, the numbers are looking pretty good. Additionally, Uber operates in 63 countries where it is estimated that only 2% of the people have actually tried Uber. From that point of view, there is room for revenue growth but as we’ve seen, this rarely leads to profit.

Other Key Points

When a company provides a prospectus for their IPO, they always include risk factors. Uber’s risk section was 35,000 words long. Apparently, Microsoft’s was just 1,100 words when they listed in 1986.

One major concern is the drivers. Uber labels its drivers as contractors and not employees. This means that Uber doesn’t have to pay a minimum wage or retirement contributions among a lot of other things. Momentum is building behind drivers taking action as we are seeing global strikes and a mounting number of legal claims.

Autonomous Driving Vehicles

Many investors and entrepreneurs believe that driverless vehicles are the inevitable future. And that they can be mainstream by 2025. On the surface this would be great for Uber, as it eliminates one of its biggest expense. Paying a driver.

The company also has a separate unit for the autonomous vehicles. A fund that is said to be worth $7.3bn with investments from Toyota and Softbank. However, Uber is not the market leader in the space. Far from it. So they’ll have a lot more competition than they currently have in the rise share space.

Final Thoughts

At the end of the day this is a company valued at $90bn that is losing $3bn a year. Is that number justified and how will tit become profitable are two key questions to ask.

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