Uber Is Still Whitney Tilson's Favorite Short Idea

Uber Technologies Inc UBER investors are taking another big hit on Wednesday, with the stock dropping more than 4% to new all-time lows as insiders dump shares following the company’s first major lockup expiration since its IPO.

Uber shares are now down more than 21% since Whitney Tilson named the stock his favorite short less than two weeks ago.

'Not So Impressive'

This week, Tilson said nothing about Uber’s third-quarter earnings report changed his bearish outlook for the stock. Tilson said Uber adding 4 million new customers in the quarter wasn’t nearly as bullish as it may seem.

“This really isn't so impressive when you consider that the company offers a half-dozen services (Uber Eats, scooters, freight, etc.) to what it claims is a total addressable market of more than 1 billion people,” Tilson said.

Tilson noted that adding 4 million new customers by burning more than $1 billion in cash isn’t a sustainable model. He also said Uber’s projection for profitability in 2021 is highly suspect.

“There’s almost zero chance this happens,” Tilson said.

Tilson recently said he would donate $15,000 to charity after losing a bet with Citron Research’s Andrew Left that Tesla Inc TSLA would not be profitable in any quarter of 2019. Tesla reported $143 million in net income in the third quarter.

Cash Crunch Coming

Tilson is anticipating Uber will be in desperate need of cash by 2021.

He said Uber is trying to do too many things at once without even executing properly on its core ride-sharing business. Uber is growing its food delivery service and it also expanding into autonomous driving, grocery delivery, freight, bicycles and scooters, air taxis and electronic payments. In addition, it’s rapidly expanding into international markets as well.

“How can anyone look at this mess and think Uber could possibly succeed?” Tilson said.

Tilson said Uber will likely eventually be forced to shut down or divest many of these ancillary businesses in an attempt to preserve its U.S. ride-sharing business.

Benzinga’s Take

Much like Tesla shares have lagged the market for years, Uber may be destined for the same path if it continues to struggle to demonstrate a viable long-term business model. Uber is one of several high-profile tech IPOs that have burned investors in recent years. IPO investors shouldn’t let their enthusiasm for a brand, product or service cloud their judgement about the valuation of a company’s stock.

The stock traded around $26.82 per share at time of publication.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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Photo courtesy of Uber.