Uber stock (NYSE: UBER) is trading higher today amid reports that the company is considering spinning off its freight logistics division.
Bloomberg reported that Uber is contemplating whether to spin off the division through a sale or list it as a separate company. It also reported that the company is discussing the options with advisors as it looks to focus on the core ride-hailing and food delivery business.
In Q4 2022, Uber Freight revenues rose 43% YoY to $1.54 billion. In contrast, Mobility revenues rose 82% to $4.12 billion while Delivery revenues rose 21% to $2.93 billion.
Uber stock rose on better-than-expected earnings and outlook. Commenting on the earnings, the company’s CEO Dara Khosrowshahi said, “We ended 2022 with our strongest quarter ever, with robust demand and record margins.” It was also the “strongest” year for the company.
Meanwhile, while the company was upbeat on both the ride-hailing and food delivery business, it sounded circumspect on the outlook for the freight business.
During the Q4 2022 earnings call, Uber CFO Nelson Chai said, “We do expect that you’ll see us getting some traction there, but the overwhelming cycle that’s going on right now more broadly on the freight industry is going to continue to impact our business.”
He added, “And so that business will continue to lag likely versus where we would have hoped and, certainly, versus a year ago where it was a much different dynamic more broadly in Freight in this country.”
Uber Reportedly Looking to Spin Off Its Freight Logistics Business
Uber stock is slightly higher today on reports of the spinoff. The stock is up 34% for the year and is outperforming the markets by a wide margin. Its price action is in stark contrast to rival Lyft which is down over 11% for the year.
Uber provided strong guidance for the current quarter. In constant currency, it expects its revenues to rise between 20-24% in Q1 2023. In absolute terms, it would mean gross booking between $31 billion-$32 billion.
The company forecast adjusted EBITDA between $660 million-$700 million. The guidance surpassed analysts’ estimate of $612 million in adjusted EBITDA.
Nelson Chai, Uber’s CFO said, “In 2022, we significantly exceeded our profitability outlook, with an incremental margin of 10%.” Chai added, “Our outlook for a Gross Bookings and Adjusted EBITDA step up in Q1 builds on that progress, and sets us up for yet another record year.”
Uber ended 2022 with monthly active platform users of 131 million, which is 11% higher YoY.
Lyft Stock Has Fallen in 2023
Notably, after Lyft’s disappointing Q4 2022 earnings, several analysts including Truist’s Youssef Squali said that Uber is a better bet in the ride-hailing space. Bank of America is also bullish on Uber and advises buying the stock.
Notably, Uber also officially launched its ad business last year. Uber would now allow brands and advertisers multiple advertising options on both Uber Eats and Uber platforms.
Importantly, it would feature “Journey Ads” which would let advertisers target users with ads based on their journey profile. Uber would also let advertisers email Uber and Uber Eats users with exclusive offers.
As the fight for ad dollars heats up, and names like Amazon scale up their advertising business, Uber would face higher competition. The company however believes that given the precise geolocation data about users, it can offer value to advertisers on the platform.
Meanwhile, companies like Amazon are eating market share from digital ad giants like Alphabet and Meta Platforms. In Q4 2022 while Amazon’s ad revenues rose 19%, Meta Platforms and Google search witnessed a YoY fall in revenues. There is a guide on buying Amazon stock.
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