About a year ago, I warned investors about some red flags that I saw with Uber (NYSE:UBER). The company let 7,000 employees go in a single month, and that made me feel cautious about UBER stock.
The markets were still somewhat in panic mode at that time due to the impact of the Covid-19 pandemic. In May of 2020, it was unclear how long it would take for the travel industry to recover.
A number of vaccines have been distributed since that time. Moreover, UBER stock holders have regained some of their losses during the past year.
On the other hand, the stock’s price action has been in a holding pattern in 2021. Is this a sign of trouble, or are there reasons to stay in the trade?
A Closer Look at UBER Stock
$50 seems to be a magnet for UBER stock as the market keeps bringing it back to that price point.
The stock started 2021 there, and as of July 18, it’s still hanging around that same $50 level.
Moreover, there appears to be some major resistance at the $60 level.
On four different occasions this year, UBER stock rallied to $60 but then fell back down.
Therefore, if you choose to own some shares, you might want to take partial profits if the stock reaches that resistance point. By that, I mean you can sell some but not all of your shares for a profit.
Another important point is that Uber has trailing 12-month earnings per share of -$2.21. Without a doubt, the stakeholders will want to see that number turn positive in the near future.
Accentuating the Positive
Admittedly, Uber’s first-quarter 2021 results presented a mixed picture.
The good news was that the company’s quarterly gross bookings totaled $19.5 billion, marking a 24% year-over-year improvement.
However, Uber’s quarterly revenues of $2.903 billion represented an 11% year-over-year decline.
But then, perhaps it’s not reasonable to make that comparison. After all, the first quarter of 2020 was pre-pandemic, at least in some parts of the world.
CEO Dara Khosrowshahi attempted to accentuate the positive, saying, “Uber is starting to fire on all cylinders, as more consumers are riding with us again while continuing to use our expanding delivery offerings.”
I’m not ready to declare that Uber’s firing on all cylinders, but there are signs of a turnaround.
For example, in May the company’s ride-hailing business returned to pre-pandemic levels in the U.K.
Furthermore, for the week starting on May 17, Uber’s total gross bookings in Europe recovered to more than 80% of the level reported in the same period in 2019.
On the Road Again
Anabel Diaz Calderon, Uber’s regional general manager for Europe, the Middle East and Africa, seems to have been taken by surprise by the swift recovery of this segment.
“We were frankly not anticipating the speed of the recovery we have seen in some key geographies and definitely the UK,” Diaz Calderon conceded.
Moving over to the U.S., it’s encouraging to see that the company’s drivers are returning to work and as a result, passenger wait times are decreasing.
During the week of May 17, according to Uber, 33,000 drivers joined its U.S. platform.
Reportedly, that week marked a new record in terms of drivers returning to the road since the start of 2021.
Plus, active driver hours increased 4.4% compared to the previous week.
Carrol Chang, Uber’s head of U.S. and Canada driver operations, connected the dots between the nation’s recovery and Uber’s returning workforce.
“With the economy bouncing back, drivers are returning to Uber in force to take advantage of higher earnings opportunities from our driver stimulus while they are still available,” Chang explained.
The Bottom Line
It does appear that there are signs of a recovery in the ride-hailing market.
Still, UBER stock investors will need to be patient.
A breakthrough of the stubborn $60 level could happen this year, but until that happens, it’s best to maintain a small position size.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
