Uber is set to report third-quarter earnings Thursday (Nov. 5) just as the company’s stock is soaring on the election victory of Proposition 22, a California referendum to exempt ridesharing companies from the state’s AB 5 gig worker law.
Here’s a look at what to expect when Uber releases earnings after the bell:
The Latest News: Uber Wins On Prop 22
Shares of Uber and other gig economy companies were rallying a day after California voters backed Prop 22. The measure essentially repeals AB 5, a state law that required Uber, Lyft and other gig-economy firms to classify most workers as employees instead of independent contractors.
By passing Prop 22, voters removed a major cost and uncertainty from Uber’s business model. Had AB 5 remained, it could have forced the company to provide healthcare and other job benefits to millions of drivers around California and the United States in general.
Uber CEO Dara Khosrowshahi said he was pleased with the outcome and would have details on lesser benefit offerings for the company’s gig workers in the coming weeks.
“With this vote, drivers and delivery people will get what so many of you have been asking for: access to benefits and protections, while maintaining the flexibility and independence you want and deserve,” Khosrowshahi wrote in a letter to drivers, according to published reports.
He added that “the future of independent work [is now] more secure.”
Uber’s shares were up as much as 15 percent Wednesday on the California referendum news, and have risen about 30 percent in the past three months to reach about a $71 billion market cap.
Uber also won a major legal victory during the third quarter in London, where its ride-hailing service has faced longstanding hostility from the city’s famed fleet of taxi operators.
While not an outright reprieve, a judge ruled in late September that Uber and its 45,000 drivers could continue to operate in the British capital for the next 18 months.
In doing so, the judge said Uber’s track record was imperfect but improving, and felt the company was doing what a reasonable business could be expected to do, and perhaps even more.
With Thursday’s earnings report, investors will want to see what the company is doing to ensure that opportunity isn’t squandered.
With the independent contractor issue at least temporarily off the table, the California-based company will have some bandwidth freed up to address other issues that have been plaguing it due to the pandemic this year.
For example, look for management to address COVID-inspired lifestyle changes that have turned Uber from a ridesharing company that also did deliveries via Uber Eats and Uber Freight into a delivery company that also does ridesharing.
In some ways, Uber has said it’s lucky to be in the position it’s in, where it can vary its business mix depending on COVID-19’s prevailing state. When ridesharing suffers, the delivery business surges — and vice versa.
Still, investors will be eager to see the latest booking metrics between Uber Eats and the company’s main ridesharing business.
Although Uber has been streamlining and reducing costs for most of the year — including headcount reductions and shedding its driverless car and bike-share business — it’s still growing in other new areas, such as Uber Freight.
With nearly 65,000 carriers in its network and thousands of shippers as customers, Uber Freight is expected to play an increasingly important role in the company’s third quarter results and beyond.
The company announced last month that it had raised $500 million in funding from Greenbriar Equity Group to scale Uber Freight’s logistics platform and accelerate product innovation that equips shippers with technology to power their supply chains.
“We are tremendously proud of what we have accomplished in a few short years,” Uber said it a statement. The company said it was using technology to transform outdated, analog processes to enable shippers and carriers to succeed in a rapidly changing industry.
Uber will also be pressed for updates on its plans to handle a flood of discriminations lawsuits it’s facing surrounding a company program to offer free delivery services to Black-owned restaurants.
According to news reports last week, Uber is facing 8,500 demands for arbitration concerning the promotion, launched in June in the wake of widespread racial protests surrounding Minnesota’s George Floyd police-involved killing.
So far, Uber’s CEO has said he intended to keep the fee-waiver plan in place until year’s end.
The Q3 Forecast
All in, analysts expect Uber to post a third quarter loss of $0.61 per share, compared to a $0.68 per share loss in Q3 2019. They also see about a 15 percent decline in revenue to $3.2 billion.