Uber IPO: Can the Company Ever Be Profitable?

Uber IPO: Can the Company Ever Be Profitable?


Not all that long ago, if you wanted to get
around in the city, your two main options were public transportation or hailing a taxi.
But then came Uber. The young company dominates the U.S. ride-sharing industry, with nearly
60% market share, and has expanded its business to 65 countries around the globe. Ride-sharing
is poised to grow into a $133 billion industry by 2023, and Uber is well positioned to benefit.
In this video, we’re going to break down exactly how Uber makes its money by getting millions
of riders to their destinations every day. Uber makes money every time a rider opens
the company’s app, hails a driver, and pays for a ride. And the company has a lot of riders
to make money off of. Uber’s ride-sharing business operates in more than 700 cities
across six continents, and has 91 million monthly active users on its platform. In 2018,
Uber’s bookings, which is the amount the company collects from riders before it has to pay
its drivers and other fees, totaled $50 billion, up 45% from the year before. From those bookings,
the company generated $11.3 billion in revenue, a 43% increase from 2017. But if the company
had $50 billion in bookings, but only brought in $11.3 billion in sales, where did all that
money go? Uber’s business couldn’t exist without its drivers, who work as independent contractors
for the company, and complete 14 million trips every day. Uber pays them, along with other
expenses, to keep its business running across the globe. When all of its expenses are totaled
up, and additional income added in, Uber lost $1.8 billion in 2018. 
While Uber isn’t profitable right now, the company’s loss of $1.8 billion in 2018 is
an improvement from its adjusted loss of $2.2 billion in 2017. Additionally, Uber is looking
to other businesses outside of ride-sharing to drive growth. One such business is the
company’s food delivery service, Uber Eats, which accounted for 12% of the company’s total
sales in 2018. The service is available in 500 cities globally, and Uber says it’s the
largest meal delivery platform in the world outside of China, based on its gross bookings.
This small business could be an important one for Uber because it helps the company
diversify its revenue and tap into the fast-growing food delivery market. Uber also runs a business
that pairs shippers and truckers together called Uber Freight. The company is still
working to expand the business, but it’s an early indication that Uber aims to be a transportation
platform and not just a ride-sharing company. Additionally, the company is developing autonomous
vehicle technologies and has a small fleet of self-driving vehicles on the road in Pittsburgh.
Autonomous vehicles could eventually help Uber lower expenses and increase rides, though
the mass rollout of this technology is still years away. 
While Uber has built itself into a ride-sharing powerhouse, the company still faces stiff
competition. Lyft, Uber’s rival in the U.S., has about 39% of the market right now. And
while Uber’s entered many international markets, its success abroad is anything but guaranteed. 
So, rider fees are how Uber makes most of its money, but keep an eye on how the company
expands Uber Eats and its other businesses as well. Thanks for watching this video!
If you have a company you’d like to see us break down,
mention it in the comments section below and be sure to like the video and subscribe to
get more videos like this from The Motley Fool.

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About the Author: Oren Garnes

15 Comments

  1. THIS STOCK WILL TANK ALONG WITH LYFTS STOCKS BECAUSE WITH LESS & LESS DRIVERS IT WILL BE WORTHLESS AS DRIVERS ARE PUSHED AWAY FROM DRIVING BY RIPPING THEM OFF & CONTINUOUSLY DROPPING ALREADY PATHETICALLY LOW WAGES!

    BE A REAL HUMAN BEING & DON'T SUPPORT THESE FASCIST PIGS OR THEIR ENDEAVORS TO BECOME WEALTHIER WHILE THEY RIP OFF & EXPLOIT WORKERS!

    STAND FOR SOMETHING OR LIVE FOR NOTHING!

  2. It doesn't make a profit because it pays its management millions. How can a company with practically zero running costs apart from keeping the app accounting software running and marleting not make a profit? They don't own the vehicles don't pay maintenance don't use fuel…they just take a cut for providing the software for the platform. Basically there is no way in the world that the upper management of uber isn't making a killing.

  3. I traded options and futures for many years before I became disabled. I didn't have a job I could do until Uber. Y'all are looking at the company from a "textbook" perspective. You're only looking at numbers. I had that perspective, too until I started working for them. Boy what I've learned. Uber is a house of cards. Uber now treats drivers like slaves. Many drivers live in their cars and more than half are living under the poverty level. Uber is paying it's drivers HALF of what it did 3 years ago…. while at the same time raising prices to customers. We are PISSED. A customer can order from McDonalds…. sees a "service fee" by Uber of $8, under that it says "delivery fee .49". They don't tip cash…. there is a place in the app, but most don't. You know how much a driver gets for a mcdonalds delivery? $2.89. If you are fast you might be able to get 3 of those in an hour at most. Uber is a house of cards. Think abou it…. all it is basically is an app (and the number of competitors i s growing…. sony is woring on it's app in Japan before they launch it in the US). Uber's strength is in it's driver base which they are tearing apart so their books look good before the IPO. We have no union because we are not considered employees. BUT, we are organizing now on facebook and other platforms. We are growing stronger and stronger every day. A huge increase in Uber's labor cost is coming as we strengthen and have our demands met. Our new group – https://drivers-united.org/ What uber is doing is losing it's long time, experienced driver base and replacing it with a high turnover rate of people who will work for less than minimum wage. They leave quickly. There's only a limited amount of people that uber can do this to until it becomes a "joke" company that nobody will work for. Threre are MANY competitors you have to take into consideration… Door Dash, Favor, Postmates, Caviar…. the list goes on and on. Drivers are switching to these other companies because they get much better treatment than by Uber.
    I would NEVER invest in this company knowing what I know now. I guarantee you the executives are going to cash in their stock options and run. They're going to cash in before this company collappses. There are plenty of good companies to invest in. Uber is not one of them.

  4. Cannot even make money in core business model, how do you expect new business line will generate income……wtf

  5. UBER, A BILLION DOLLAR COMANY THAT CANNOT EVEN COVER GAS COSTS.

    The Future of Uber is Dangerous Cars, and Dangerous Drivers.

    DRIVERS CANNOT EFFORD BRAKE PADS, MATENENCE., Or even pay rent.

    When Uber went from taking 20% of what customers pay,
    To now in 2019., they take 40% to 70% on almost every ride, and do not pay the gas costs!

    Drivers cannot fix their cars, pay rent, and so you breed a broke despite driver who may start robbing and cheating

    customers, as that is what uber has done to them.. While they go homeless, as their brake pads wear out.

  6. Disliked as video did not address the question in the title! And a better question is: WIll uber drivers ever be profitable?

  7. Uber oppresses its drivers. They deserve better wages, and benefits. I've ready drivers must work 16 hours a day just to break even. The heck with Uber; it's Lyft for me.

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