Uber posted a surprise Q2 revenue beat, with the ridesharing company bringing in over $8.1 billion in the last three months. Total gross bookings reached $29.1 billion, which is up 33% YoY. Despite increased fuel prices, Uber says it has more drivers and couriers than before the pandemic. Uber is forecasting Q3 operating profit above estimates, betting on steady demand for its ride-hailing and food-delivery services. David Trainer, Ceo of New Constructs, breaks down Uber's Q2 results and the headwinds facing the ridesharing company in the coming months. 

Opening Bell

Uber Beats Q2 Revenue Expectations, Despite $2.6 Bln Loss

here to discuss is David trainers, Ceo of new constructs. David want to get your thoughts and your reactions to Uber's Q. Two results just broadly. And what do you see as the company's kind of main challenge? I think profits are going to remain a challenge. I think look there's a nice blip here where things got better, you know, thank goodness. Uber is not focused on adjusted Ebitda anymore. They've now realized that's not a real profit number uh you know, aha moment for them. But this operating cash flow number is not something we would trust. Look, the company has burned $36 billion in free cash flow over the last four or five years or since it's been public so tremendously unprofitable business. Uh We've never yet seen a profit, a real true positive profit margin. Um And I think it's good if they can't get to a real profit positive profit margin, we won't know for sure until we see the 10-Q. But I would tell you Alicia the valuation is still extremely high even if they are generating profits. I'm glad you bring up the cash flow because of something I was gonna ask you just about in a moment or right now actually because they did do cash flow a little bit differently. And so I get your kind of hesitation to to um you know, take it at face value but they reported cash flow positive for the first time ever dig into that a little bit more for me and maybe if you can touch on how the company, you know, has a challenge ahead of it and shielding itself from rising fuel prices. Yeah. Look I mean we've been saying since before the I. P. O. For Uber that this is a broken business model. It's it's a commodity business, right? I mean now we see the taxis in new york city and other cities also have an app and that was really Uber's only real advantages. They had an app, right? And I don't really know that an app is an advantage. Uh And so these businesses are commode business as soon as they raise prices to a level where they can make money, it's going to invite more competition. So yeah I question how they how they measure free cash flow. I'm sure they're ignoring stock based compensation. It's probably a better number than the adjusted Ebitda number that they were using. Which any investor believes in. That is foolish and but ultimately though at least to yeah I don't think this is a long term cash flow positive business. I certainly don't think that the food delivery business is a long term cash flow positive business. Uh And so you know, look this is you know, this is Wall Street trying to to make uh one of their I. P. O. Darlings look good and ultimately, you know this is one of these stocks we think could could end up going to zero eventually. That's an interesting take you bring up Uber's food delivery service. Let's talk about that a little bit because different from like a lift. Uber does have diversified revenue streams, that delivery service held it up at least for the better part during the pandemic and really was able to offset the tremendous losses or certainly the demand loss that it saw on the mobility side. But now coming into this quarter, you got Uber, Uber's mobility, that revenue surpassed the delivery revenue two quarters in a row. Now, what do you think this says about the demand for writers and Uber's ability to diversify its revenue stream? Is that truly an upside in comparison to a lift when they're kind of losing demand on one side, gaining out on the other side. Do you see them net neutral, then I see them both net negative, at least here, look, it's not diversification if it loses money, right? I mean, revenue by itself is not something that's hard to generate. We can all go out and generate revenue selling whatever you want to sell it, especially if we sell it at a loss, people will pay us plenty of money to, you know, if we can give them a product below cost. Right? So revenue by itself is not a justification for being a business diversifying from one money losing business into another. Is not a good idea. That's not in my mind, diversification, it's a distraction. And so I think left is better off because they have not invested in money losing businesses and to the extent that they are, they're focused more on the last mile delivery so that they don't have to eat as much losses as what Uber is eating in doordash. So um I'm sorry and and Uber eats, but you know, and by the way, doordash isn't good business either. So yes. No, I don't see that that diversification is actually positive. It's just another money losing businesses that they have under one roof. Alright, if there's anything else to weigh down Uber, I mean, there's this backlash that the company is still dealing with from the investigation by the international consortium of investigative journalists um that really pointing out some real central questions about the company's behavior prior to the tenure of its current ceo do you see this further affecting the company's reputation and eventually the bottom line, especially, you know, more more long term. You know, it's a great question lisa. And, and and I think most of probably that um boorish behavior is in the review meter for this company. But I think there's something to be said about the culture of any business that's never held accountable for being profitable. That creates a culture of spending, of carelessness, of lack of discipline. That's never good long term and and that's sort of why, you know, until they really show us the money. Um we're gonna really be doubtful that this is gonna be a sustainable business. Uh and again, I want to, I want to make make it clear that no matter what you believe about the profitability of the of the business and its potential, the valuation of the stock implies that Uber's gonna have close to 100% of its total addressable market At some point in time. So the valuation even down where it is today, 50% below its all time highs is still extremely optimistic about the future cash flows of the business. So there's still a real disconnect here between valuation and profitability no matter how you slice it. My final question to you is gonna be around your outlook for the company in terms of profitability. I think I already know your answer there for the most part. So I'll ask you this listen when we looked at an Uber a couple of years ago a lot of people were optimistic about it because you here you remember the tale of amazon right being unfair, profitable for about a decade. But that growth story getting into what it is now and I think a lot of people look at Uber to be that kind of next kind of growth story. Um but we're not yet seeing that and I hear kind of from you, you don't expect that to be the case. Just break down the difference there. Mm Well I would say first of all uh the number of companies that have claimed that they're going to be the next amazon uh is a long list. Uh, and it seems like it's a way to justify being unprofitable. Hey, amazon was unprofitable one point, but they became profitable. Most businesses are improbable and they're beginning very few actually ever make it to profitability. The comparison is a joke in my opinion. Um, look, I mean, everyone would compare themselves to the best ever. I mean, if they could. And I think the problem is honestly, most investors lack the reliable, fundamental research needed to understand just how farcical these comparisons are. And look, Uber has nowhere near the market that amazon had. And by the way, look, you know, amazon was a big bet at the time too. It was a very expensive stock. It was able to grow into a lot of its valuation. It remains expensive and it got into an entirely different business to make money. It's never really even made money. It's an original business. What business that Uber might possibly be able to get into? I don't know where bin I can make money that is, but I will tell you that the valuation implies that they're going to do that already. So it's already priced to do things that are really incredible, which is the danger of being baked into the kind of price for the company right now that as the company is down 40% over the past year. David really appreciate your time and your inside David Trainer. Ceo of new constructs