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Uber. WeWork. I'm at a loss - the real 'growth' story

By Vern Gowdie - posted Monday, 2 September 2019

Ahead of its much hyped IPO (Initial Public Offering), Uber was being touted in some circles as a US$120 billion business.

Thankfully, common sense (and I use that term lightly) prevailed. In May 2019, Uber hit the market at a more 'realistic' value of…US$76.5 billion.

What does that sort of money buy you?


In Uber's case, it appears to be a whole lot of red ink.

This is part of Financial Times Alphaville's coverage of Uber's second quarter 2019 results (emphasis is mine)…

The quarterly net loss, which hit $5.2bn vs $878m a year ago and included $3.9bn in stock based compensation expenses related to the IPO, was spectacular in its own right. (On an adjusted basis the EBITDA loss came in at $656m, which marks an improvement on Q1.)

'But the thing that really hit market sentiment was the slowdown in revenue growth at 14 per cent to $3.2bn. Analysts had been expecting a 20 per cent rate which would have taken the top line to $3.4bn.

'This is important because Uber's investment case is based on the thesis that the continuous net losses don't matter because it's still a growth company, and its pathway to profitability is through market domination and, of course, revenue growth.

Uber tears up - in adjusted terms - US$656 million in a three-month period, but the real bummer is a modest slowdown in revenue growth.

Talk about skewed priorities.

But that tells you all you need to know about the 'value' proposition associated with these so-called unicorns.


As long as it's a 'growth' story, we'll keep placing an over-over-over inflated price to these perpetual cash burners.

The punters expressed their disappointment with Uber's slowdown in revenue growth. Shares in the ride-sharer fell almost 25%.

When it comes to value, I'm a little old school. Just to humour myself, I had a look at what the US 10-year government bond was yielding in May 2019. The rate was 2.4%.

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This article was first published on Rum Rebellion.

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About the Author

Vern Gowdie has been involved in financial planning since 1986. In 1999, Personal Investor magazine ranked Vern as one of Australia’s Top 50 financial planners.
His contrarian views often place him at odds with the financial planning profession today, but Vern’s sole motivation is to help investors to protect their own and their family’s wealth. Follow him on Twitter @RumRebellionAus

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