What Happened to Uber Stock?
- Uber (NYSE:UBER) stock sunk more than 5% Thursday after U.S. Labor Secretary Marty Walsh said that most gig workers should be classified as employees.
- UBER stock has been a “reopening” favorite on Wall Street. Year-to-date, shares are up roughly 7%. But this recent news is taking some of the momentum out the “long UBER” trade.
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Uber Stock: The Specifics of Why UBER Is Down
- U.S. President Joe Biden has a vision to expand protections on workers. This includes, but is not limited to, classifying gig workers as full-time employees.
- U.S. Labor Secretary Marty Walsh has remained quiet on this topic. Until today. When he told Reuters that most gig economy workers in the U.S. should be classified as employees.
- Uber has built its business on the back of cheap, independent contract… and still, the business model isn’t profitable.
- Classifying such individuals as full-time employees would add huge costs into the operating model, and put even more pressure on an already strained business model.
- UBER stock is tanking on this news.
Does It Matter
- We aren’t too concerned about the gig worker classification situation. We aren’t sure how it will end, but we are sure that in whatever way it does end, gig employers like Uber, Lyft (NASDAQ:LYFT), and Fiverr (NASDAQ:FVRR) will adjust.
- Instead, what we are concerned about when it comes to UBER stock is the company’s lack of innovation.
- This company used to be the epicenter of innovation. Back in 2015/16, this was the company to be at — every top software engineer grad in the country wanted to work at Uber, they had a self-driving business, they had a flying car business, and they were taking over the world.
- Then the visionary who laid the groundwork for all of that innovation, Travis Kalanick, was forced out of the company. He was replaced by a “housekeeping” CEO who has since emphasized near-term profitability over long-term growth. The innovation has stopped.
- Uber sold its self-driving business to Aurora. They sold their flying car business to Joby Aviation. A bunch of talent has left to other, more innovative tech companies, like Opendoor (NASDAQ:OPEN). By our checks, top software engineer grads don’t go to Uber anymore.
- This company is a shell of its former self on the innovation pipeline.
UBER Stock Price Forecast
- Without a robust innovation pipeline, UBER stock is doomed to remain a sideways stock for the foreseeable future, as a stretched valuation, limited profitability, and a lack of long-term growth potential will constrain upside.
- We think investors are best to forget about UBER stock.
Uber is a great example of why innovation matters. When this company was doing innovative things like self-driving and flying cars, the sky was the limit. Remember how much everyone was talking about Uber as the “next big thing” back in 2015/16?
But all the innovation has stopped. And now, no one is talking about Uber being the “next big thing”. Instead, it’s just an undifferentiated ride-sharing company that, two years after going public, is barely above its IPO price.
UBER stock is not cutting it when it comes to delivering huge returns to shareholders.
You know who is cutting it?
Shopify (NYSE:SHOP). Square (NYSE:SQ). The Trade Desk (NASDAQ:TTD). Roku (NASDAQ:ROKU). Those stocks are up nearly 10X over the same time frame that Uber has gone sideways.
The difference? Innovation.
Shopify, Square, The Trade Desk, and Roku have continued to relentlessly innovate, whereas Uber has not, and the results show in the stock prices.
In investing, innovation is everything.
That’s why I launched Innovation Investor — my exclusive, venture-capital-style investment research platform that hyperfocuses on investing in the most innovative companies in the market, with the goal of identifying potential 10X investment opportunities at early stages.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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