Dara Khosrowshahi: Uber Has Enough Cash To Get Through Coronavirus Crisis

By Amit Chowdhry ● March 21, 2020
  • Earlier this week, shares of Uber Technologies jumped nearly 50% after Chief Executive Officer Dara Khosrowshahi said that the company has enough cash to get through the coronavirus crisis

Earlier this week, shares of Uber Technologies jumped nearly 50% after Chief Executive Officer Dara Khosrowshahi said that the company has enough cash to get through the coronavirus crisis.

“We are very fortunate to have a strong cash position with about $10 billion of unrestricted cash as of end of February,” said Khosrowshahi during a call with analysts before the markets opened on Thursday via Reuters. “In any crisis, liquidity is key.”

The comments by Khosrowshahi come at a time where many cities have gone into a lockdown mode to contain the rapid spread of the COVID-19 (coronavirus) spread. But even in an extreme scenario where the rides business declines 80% for the rest of the year, Uber would still have $4 billion of unrestricted cash.

“About two-thirds of our cost of revenue and operating expense, excluding stock-based compensation, is variable,” he said. “If a trip doesn’t happen, many of these costs go away,” added Khosrowshahi.

The ride-sharing industry saw at least a 60% hit in areas like Seattle and Hong Kong. But Uber is starting to see signs of recovery.

Uber and Lyft both started suspending the ride-sharing businesses in the US and Canada. And this caused the company’s shares to substantially drop.

However, the Uber Eats food delivery business has been seeing growth as consumers stop eating at restaurants. And earlier this week, Uber Eats said it would waive the delivery fee for independent restaurants across the United States and Canada.

“Our Eats business is an important resource right now especially for restaurants that have been hurt by containment policies,” Khosrowshahi explained via Reuters. “In the United States, our F&B sales team is now closing two-and-half times the number of new restaurants we normally do per day.”

On Friday, Wells Fargo Securities managing director Brian Fitzgerald upgraded Uber’s stock to overweight from equal weight. Fitzgerald wrote that the shares should rebound after the COVID-19 disease gets back under control, according to Marketwatch.

JMP Securities analyst Ronald Josey reduced the bookings and profit estimates for Uber for the rest of the year, but he pointed out that ride-sharing can “materially take share of miles-driven in a post-COVID-19 world.” Plus he said that Uber is “best positioned to benefit globally.” And Josey pointed out that Uber said on its conference call that Uber saw a 10-fold increase in restaurants signing up for Uber Eats in the span of about 8 days this month. Josey put a market outperform rating on Uber stock and lowered the price target to $37 from $56.

Maria Ripps and Michael Graham of Canaccord Genuity remained bullish on the stock and kept it at an unchanged $55 target price. They explained that Uber’s business will be among the most impacted due to the coronavirus, but they are confident that the stock should be among the best performers “on the other side of the pandemic.”

RBC analyst Mark Mahaney noted that there were three potential worse case scenarios for the ride-sharing industry. Mahaney’s first scenario shows Uber seeing 20% growth by Q3 and the second scenario suggests a recovery coming in Q4. But the final scenario indicates Uber may not recover until 2021.

CNBC “Mad Money” host Jim Cramer also gave his opinion about Uber’s growth during stock questions on his show. “I think Uber is a push. I like this stock longer-term, but shorter-term I don’t think you can make the numbers,” Cramer replied.