As I commented in a column weeks ago, there are three major reasons to own a stock: (1) improving revenues; (2) improving earnings; and (3) good or improving dividends. Uber has improving revenues, but that growth is being eroded by brutally competitive markets. Uber remains the ride-share leader in every country it operates in, but in the last year, its ride-share market position in nearly every market, especially in the U.S. and Canada, has been truncated. Unfortunately, few stupids consider that a negative.
Uber has burned through $13 billion in greenbacks since launching in 2009 and losing money every year. Uber lost $2.8 billion in 2016, $4.5 billion in 2017 and, thanks to last year’s sale of its Asian franchises, only lost $1.8 billion in 2018. Still that’s enough $2 bills to dam the Mississippi River at Natchez, Biloxi and Vicksburg. The losses will continue, and management has no bloody idea when Uber will earn a profit.
As most readers know, I consider dividends and dividend growth critically important to my investment thesis and seldom recommend nondividend stocks. If an issue has exceptional growth and earnings potential and doesn’t pay a dividend, there are times when I’d recommend a position. But those times are few, and Uber doesn’t qualify. Some say if a miracle happens and Uber posts a profit, management may not be able to pay a dividend until 2031. But my two Malamut puppies, Abbot and Costello, won’t be around to enjoy the vigorish.
I doubt any new shareholders have a profit in LYFT. After the 180-day lock-up period ends, initial shareholders may sell millions of shares they’ve held for years. Prior to LYFT’s flop, Uber believed it could sell enough shares to value the company at $120 million to $125 billion! Now CEO Dara Khosrowshahi should be spending time in the Amen Corner of his church, praying the stupids will value Uber’s IPO at $100 billion. However, I can’t imagine how a company with slowing revenue growth, definite and continuing future losses, no earnings in site and no dividend for maybe 12 years could have a $100 billion valuation. A $100 billion valuation says Uber is worth more than Eli Lilly, which made $6.5 billion, or Nvidia, which earned $4.4 billion, or the immensely profitable Union Pacific and Norfolk Southern railroads.
