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If they do this, their stock will collapse. They are priced on future growth (which is already getting a lot less valuable), so if they admit there is a cap, t

If they do this, their stock will collapse. They are priced on future growth (which is already getting a lot less valuable), so if they admit there is a cap, they will start trading at a reasonable P/E ratio. Edit: P/S ratio, not P/E ratio. Of course their P/E ratio is negative right now.

api 4y ago
It'll be interesting to see what happens when they end up with a viable business but one that is probably never going to return the crazy returns that were originally priced into the valuation. There are tons and tons of these across all sectors left over from a prolonged era of incredibly cheap money.
- pclmulqdq 4y ago
  Ironically, what happened to WeWork is a very soft version of what will likely happen to the Apps and SaaS space in a high-interest environment.
rrdharan 4y ago
> they will start trading at a reasonable P/E ratio As in, a positive one?
- pclmulqdq 4y ago
  I should have said P/S ratio.
- dchftcs 4y ago
  Slightly positive perhaps, as an investor may ask to get paid to hold Uber for their troubles.
senttoschool 4y ago
>If they do this, their stock will collapse. The other option could be bankruptcy which would bring their stock to $0.
- yywwbbn 4y ago
  If they are cashflow positive this year that seems unlikely
  - senttoschool 4y ago
    Hence, why my original post said Uber will have to shrink tech/HQ employees, reduce incentives, and admit that growth will reverse/decline.
    - ProAm 4y ago
      All they need to do is license their logistics software and they will be extremely profitable.
      - senttoschool 4y ago
        License their logistics software to who? Lyft? Bolt? Very few business wants/can to enter ride sharing, food delivery industry.
        ProAm 4y ago
        You can use this style of logistical/pricing software across so many industries.
        senttoschool 4y ago
        Not really. It's just a bunch of basic demand/supply algorithms. Nothing special. I doubt Uber can make a generic version that other businesses will buy.
      - pclmulqdq 4y ago
        Most of these companies don't actually have a lot of "secret sauce" that can be exported to other companies like this. Maybe they could do it trading on their brand image, but dedicated logistics software companies would likely offer a much better product. Internal products tend to be built to internal needs, and aren't always great quality.
_ea1k 4y ago
Isn't it currently about 2X P/S? That's not terrible in itself.
- pclmulqdq 4y ago
  If you think about what its sales are, it should be trading a lot lower than 1. Most of what it is doing is matching a buyer to a seller, and taking some amount of that transaction in exchange for facilitating the transaction (I think ~30-40%). Today, it counts the entire price of a ride as revenue, and the entire cost of that sale as an expense. In comparison, if you use Uber's ideas of what is revenue and what is an expense, Ebay (another transaction facilitator) had a P/S ratio of 0.34 in 2019 with a fee of ~10%. Ebay does not count revenue the same way Uber does - they only count their fees as revenue. Another transaction facilitator, Costco (yes, I am comparing Uber to a retail chain - it makes the same fundamental trade), has a P/S ratio of 0.89. Walmart is 0.61. Nobody who retails something from a wholesaler has a P/S ratio greater than 1. Uber is an online retailer of taxi services. Most two-sided platforms treat their fee as their earnings, and thus can claim a very healthy margin. Uber doesn't.
  - _ea1k 4y ago
    Thank you for the explanation. That makes a lot of sense and does provide a much better way to estimate their value relative to sales.

api 4y ago

It'll be interesting to see what happens when they end up with a viable business but one that is probably never going to return the crazy returns that were originally priced into the valuation. There are tons and tons of these across all sectors left over from a prolonged era of incredibly cheap money.

pclmulqdq 4y ago
Ironically, what happened to WeWork is a very soft version of what will likely happen to the Apps and SaaS space in a high-interest environment.

rrdharan 4y ago

> they will start trading at a reasonable P/E ratio As in, a positive one?

pclmulqdq 4y ago
I should have said P/S ratio.
dchftcs 4y ago
Slightly positive perhaps, as an investor may ask to get paid to hold Uber for their troubles.

senttoschool 4y ago

>If they do this, their stock will collapse. The other option could be bankruptcy which would bring their stock to $0.

yywwbbn 4y ago
If they are cashflow positive this year that seems unlikely
- senttoschool 4y ago
  Hence, why my original post said Uber will have to shrink tech/HQ employees, reduce incentives, and admit that growth will reverse/decline.
  - ProAm 4y ago
    All they need to do is license their logistics software and they will be extremely profitable.
    - senttoschool 4y ago
      License their logistics software to who? Lyft? Bolt? Very few business wants/can to enter ride sharing, food delivery industry.
      - ProAm 4y ago
        You can use this style of logistical/pricing software across so many industries.
        senttoschool 4y ago
        Not really. It's just a bunch of basic demand/supply algorithms. Nothing special. I doubt Uber can make a generic version that other businesses will buy.
    - pclmulqdq 4y ago
      Most of these companies don't actually have a lot of "secret sauce" that can be exported to other companies like this. Maybe they could do it trading on their brand image, but dedicated logistics software companies would likely offer a much better product. Internal products tend to be built to internal needs, and aren't always great quality.

_ea1k 4y ago

Isn't it currently about 2X P/S? That's not terrible in itself.

pclmulqdq 4y ago
If you think about what its sales are, it should be trading a lot lower than 1. Most of what it is doing is matching a buyer to a seller, and taking some amount of that transaction in exchange for facilitating the transaction (I think ~30-40%). Today, it counts the entire price of a ride as revenue, and the entire cost of that sale as an expense. In comparison, if you use Uber's ideas of what is revenue and what is an expense, Ebay (another transaction facilitator) had a P/S ratio of 0.34 in 2019 with a fee of ~10%. Ebay does not count revenue the same way Uber does - they only count their fees as revenue. Another transaction facilitator, Costco (yes, I am comparing Uber to a retail chain - it makes the same fundamental trade), has a P/S ratio of 0.89. Walmart is 0.61. Nobody who retails something from a wholesaler has a P/S ratio greater than 1. Uber is an online retailer of taxi services. Most two-sided platforms treat their fee as their earnings, and thus can claim a very healthy margin. Uber doesn't.
- _ea1k 4y ago
  Thank you for the explanation. That makes a lot of sense and does provide a much better way to estimate their value relative to sales.