Here’s what analysts are watching

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Uber CEO Dara Khosrowshahi speaks at a product launch event in San Francisco, California on September 26, 2019.

Philip Pacheco | AFP via Getty Images

Uber will report first-quarter earnings after the bell on Wednesday and Wall Street notes to investors are providing insight into what investors might expect.

The latest financials come after what’s appeared to be a challenging quarter for the company. Shares are down more than 26% year-to-date as inflation challenged consumers, the omicron coronavirus variant spread and surging gas prices weighed on the stock.

Here’s what Wall Street is watching for this quarter:

Are Uber riders coming back?

Uber has likely rebounded from any omicron rider lows. In a March filing with the SEC, Uber said mobility demand improved significantly through the month of February. Trips were 90% recovered from Feb. 2019 levels. That led the company to raise its first- quarter EBITDA guide by $25 million at the mid-point to $130 million-$150 million from $100 million-$130 million.

“Contrary to most other sub-sectors of Internet, rideshare Q1 results should be solid on the back of resilient mobility trends,” Alliance Bernstein analysts said in an earnings preview. Investors will be watching for regional recovery trends, since APAC growth has likely lagged from an uptick in Covid. Its European market could also see an outsized impact from the war and inflation, the analysts said.

How have fuel prices impacted drivers?

As gas prices shot up across the nation due to the war in Ukraine, many feared drivers would flee gig work in favor of other jobs. Some delivery and rideshare companies struggled with supply and demand imbalances from the pandemic, so further strain or a setback could ‘ve hampered financials.

For its part, Uber implemented a temporary fuel surcharge. That’s set to expire soon, so investors will be looking for color on if that kept drivers and if the company plans to extend the incentive. Gas prices were averaging $4.19 a gallon on Monday, compared to $2.9 a year ago, according to data from AAA.

Still, a bulk of drivers believe that the surcharge wasn’t enough and some analysts say the recovery in driver supply has slowed. “We think driver supply and take rate risk is elevated, with our proprietary price tracking data indicating that ride prices and wait times were up in April vs 1Q,” Bank of America analysts said in a note.

Will Uber have to increase incentives?

As mobility grows, Uber may need to implement additional near-term driver incentives because of high gas prices and a need to rebalance supply and demand.

The company spent millions last year in an effort to bring back drivers as states eased Covid restrictions and vaccinations were widely available. But those incentives weigh on its balance sheet, and investors have consistently been concerned about expensive efforts to bring back drivers.

“For 2Q, risk is that Uber may need to add to near-term driver incentives to adjust for positive demand recovery and gas prices,” the Bank of America analysts wrote. Still, the incentives may not be as costly as in 2021, the Alliance Bernstein analysts speculated.

How far can delivery go?

Uber’s delivery business had allowed the company to withstand Covid headwinds when people began ordering more at home during the pandemic. In recent quarters, it appeared that the segment, which includes its Uber Eats business, has continued to hold up as food delivery becomes a part of regular life.

But how long can delivery grow? “Following a slew of estimate cuts across the cohort of pandemic winners, the looming concern is that food delivery will miss the mark in Q1,” Alliance Bernstein analysts said.

Uber said in the March filing that delivery annualized run rate gross bookings reached an all-time high in February, which means it may need to look elsewhere to grow.

“New customer adds are likely slowing, but we believe order frequency can still be a driver of growth,” the analysts said.

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