The Sell-Off in Uber Stock Isn’t Overdone

Following earnings Uber stock remains a short, but it’s not what you think

Following a post-earnings crash in Uber (NYSE:UBER), is now a better time to buy or short shares? After kicking the tires off and on the Uber stock price chart, the observation is that bears remain in the driver’s seat. Let me explain.

The Sell-Off in Uber Stock Isn’t Overdone
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To say Monday night’s earnings release in ride share operator Uber didn’t go well would be a massive understatement. Shares tanked Tuesday by nearly 10% to new all-time-lows, and intraday Wednesday, UBER stock is off an additional 4%. The damage wasn’t entirely without merit either.

By the numbers and making for a not-too-pleasant headline, Uber continues to rack up steep losses. While not as bad as the prior quarter’s massive net loss of $5.2 billion, Q3’s red ink of $1.2 billion still isn’t for the faint of heart. But there’s also more to the story.

More favorably, factoring out both quarters’ IPO-related expenses, an apple-to-apple comparison of operating losses shows Q3’s loss settling in at $615 million compared to Q2’s $1.3 billion loss. Not bad right? For certain, UBER’s losses weren’t as bad as the click-worthy headlines indicate. And there’s more.

Uber stock’s revenues also grew to $3.8 billion for the quarter and up 30% from the year-ago period. The sales gain compares favorably to last quarter’s 12% increase and showed solid breakdown growth in the company’s Uber Eats, Uber Freight and Other Bets businesses.

Lastly, Uber’s management expressed its commitment to reaching non-GAAP profitability in 2021 with a road-map towards that end in hand. So, what gives? Why has UBER continued to come under pressure? It likely boils down to two other items not disclosed in the earnings report.

The first drag on shares has likely been Uber’s IPO lockup period agreement, which is set to expire Wednesday. In practice this means early investors whose purchase is roughly 42% underwater from the $45 IPO price can now sell shares. But will they?

UBER Stock Price Weekly Chart

The other item is the UBER stock price chart. It’s not a car wreck, but shares remain in a solid bearish downtrend. And given the pending lockup expiration, that price action feeding on itself isn’t a logical stretch. But can Uber shares eventually turn the corner?

James Schrager is in the bear camp when it comes to UBER. You can toss peer Lyft (NASDAQ:LYFT) in there as well. The University of Chicago Booth School of Business professor doesn’t see ‘the tech magic’ of a Microsoft (NASDAQ:MSFT) or Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) in UBER stock’s future.

Technically speaking, I wouldn’t bet against the academic or the Uber stock price chart right now. Within a well-defined bearish trend shares are showing no signs of bottoming. In fact, a pause or modest reprieve beneath this week’s flag breakdown would set up as a stronger shorting opportunity than cause to go long Uber right now.

Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


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