Described by the management as the ‘strongest quarter ever,’ the shares of Uber Technologies Inc. UBER plunged after its fourth-quarter earnings due to foreign exchange headwinds amid a stronger dollar and an earnings per share miss.
What Happened: Uber missed its adjusted EPS of 48 cents by 52.1% as per Benzinga Pro, coming in 23 cents for the fourth quarter. The stock plunged 7.56% to $64.48 apiece after the report.
However, the more significant headwinds in the said quarter were from a 3% annual loss of $1.1 billion on foreign exchange returns, driven by a broad-based strengthening of the U.S. dollar against foreign currencies, with a notable devaluation of the Argentine peso, Brazilian real, and Mexican peso.
Additionally, the first quarter gross bookings outlook incorporates a substantial forex headwind, emphasizing the impact of currency fluctuations on reported growth.
“We are expecting FX to be a larger topline headwind in Q1,” said company CFO Prashanth Mahendra-Rajah during the earnings call.
While the fourth quarter gross booking was up 21% year-on-year to $44.2 billion, the company now expects gross bookings in the range of $42-43.5 billion for the first quarter, representing a 5.5 percentage-point currency headwind.
However, CEO Dara Khosrowshahi added, “Despite FX headwinds, we expect continued strong growth in Q1 with 17% to 21% constant currency gross bookings growth and continued profit expansion.”
Why It Matters: The U.S. dollar prices have risen since President Donald Trump won the elections and has been engaged in tariff negotiations with some of its biggest trading partners including Canada, China, and Mexico.
Uber’s fourth-quarter revenue rose 20% year-on-year to $11.96 billion, exceeding estimates. Mobility revenue grew 25% to $6.91 billion, Delivery was up 21% to $3.77 billion, and Freight was flat at $1.28 billion.
Monthly active users reached 171 million, up 14%. The ride-hailer ended the year with $7 billion in cash and cash equivalents and $1.7 billion in free cash flow. Khosrowshahi also cited record growth in users, trips, and bookings, driven by innovation including autonomous vehicles, calling it the “strongest quarter ever”.
Price Action: Uber’s stock has risen 2.07% on a year-to-date basis, whereas the exchange-traded fund tracking S&P 500, SPDR S&P 500 ETF Trust SPY advanced 3.35% in the same period. Over the last year, Uber declined by 8.50% and SPY was up 22.32%. The U.S. Dollar Index Spot was up 0.15% to 107.737 level during the publication of this article.
The average price target among 34 analysts tracked by Benzinga is $91.81 with a ‘buy' rating. The estimates range from $77 to $120 apiece. Recent ratings from Needham, UBS, and Cantor Fitzgerald suggest a $92.33 target, implying a potential upside of 41.99%.
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