Uber is the IBD Stock of The Day for Tuesday. With its earnings report out of the way, Uber stock is breaking out from a double bottom base pattern with a 49.19 buy point.
On the stock market today, Uber shares rose 3.7% to close at 49.92. Uber released earnings results Tuesday morning. Third-quarter earnings and fourth-quarter bookings guidance topped estimates. Revenue was short of expectations, however, which the company pinned on accounting changes.
The stock traded lower premarket but has since recovered to post significant gains. Overall, Uber shares have gained more than 90% this year.
Uber Stock: Q3 Earnings Beat, Revenue Light
Early Tuesday, Uber reported third-quarter earnings of 10 cents per share on sales of $9.29 billion for the third quarter ending Sept. 30. Analysts expected Uber to post earnings of 7 cents per share on sales of $9.54 billion, according to FactSet. Some other estimates had called for earnings of 12 cents per share.
In the same quarter last year, Uber lost 61 cents per share on $8.34 billion in revenue.
Total third-quarter bookings climbed 21% year over year to $35.3 billion, compared to expectations of $34.6 billion. Bookings for the Rides business climbed 31% year over year to $17.9 billion. Bookings for the Eats, or delivery, business climbed 18% to $16.1 billion.
Uber routed 2.4 billion trips during the quarter, up 25% from the same period last year.
The 10% revenue gain marked a sixth straight quarter of decelerating sales growth.
However, the company noted that some accounting changes contributed to the lower than expected sales number. Uber Chief Financial Officer Nelson Chai said in prepared remarks that the changes reduced revenue by $521 million for the quarter.
"These model changes required a reclassification of the cost of some promotions from sales and marketing expense to contra-revenue, with no economic difference to our operating income," Chai said.
RBC analyst Brad Erickson said in a client note that without those changes "revenue overall and on delivery would have beaten Street expectations, similar to bookings."
Second Straight Operating Profit, Strong Outlook
Uber reported a third-quarter operating income of $394 million, compared to a loss of $495 million last year. The second quarter was Uber's first ever with a profit from its ride-hailing and delivery operations.
Net income for the third quarter was $221 million, recognizing a $96 million headwind that is primarily from unrealized losses on Uber's equity investments.
For the current fourth quarter, Uber projects gross bookings between $36.5 billion and $37.5 billion. Analysts were estimating $36.52 billion, according to FactSet.
"Our relentless focus on improving the product experience for both consumers and drivers continued to power profitable growth, with trip growth accelerating to 25%," Chief Executive Dara Khosrowshahi said in a statement. "Uber's core business is stronger than ever as we enter the busiest period of the year."
Uber Stock: Relative Strength Hits New High
Analysts largely saw positives from the report.
"Despite a challenging macro backdrop, Uber continues to drive robust engagement and solidify its use-case among consumers," wrote William Blair analyst Ralph Schackart in a client note Tuesday. "With driver supply also remaining strong in the quarter, at a record 6.5 million active drivers, the company appears well positioned to generate strong results despite these broader headwinds."
CFRA Research analyst Angelo Zino, meanwhile, maintained a buy rating and target price of 60.
"We are encouraged by rising profitability, specifically on the delivery side as margins expand from network efficiencies, higher advertising revenue, and marketing/incentive optimization," Zino wrote in a client note.
Meanwhile, Uber stock holds an IBD Composite Rating of 88 out of 99, according to IBD Stock Checkup. The score combines five separate proprietary ratings into one. The best growth stocks have a Composite Rating of 90 or better.
Uber shares gapped above their 50-day line on Nov. 2, following strong results from DoorDash, which competes with Uber Eats.
Uber stock's Relative Strength Rating score is at 96 out of a best-possible 99, indicating it is significantly outperforming the market.
