Uber Technologies, Inc. (NYSE: UBER) launched its initial public offering last week on the New York Stock Exchange. Despite being one of the most anticipated IPOs this year, the ride hailing service’s stock faced pressure from investors.
In combination with Uber’s shaky start, the weaker market also contributed to the stock’s decline. Global market faced weaknesses due to the ongoing trade war tensions between the U.S. and China.
Uber initially began trading at USD 42 per share, but edged lower and closed at USD 41.57 on the Company first day of trading. Uber shares continued to slide leading into Monday. Shares fell by 10.6%, as Uber’s stock price hit roughly USD 37 per share.
Uber’s shaky start has caused the Company to shave off a good chunk of its market cap. On Friday, the Company closed with a market cap of USD 69.7 Billion, however, by Monday morning, Uber’s market cap fell to USD 64.4 Billion.
The major question many investors and analysts are wondering if when Uber will be profitable. Similar to its competitor, Lyft (NASDAQ: LYFT), the two ride hailing companies are failing to report profitability.
Just like Uber, Lyft also had a disappointing IPO launch. Lyft shares have now fallen by 37.9% since its IPO.
Lyft reported its first quarter financial results last week and disappointed many investors. Lyft reported that its net losses continued to widen year-over-year. Lyft witnessed its revenue increased by 95% year-over-year, on the other hand, net losses totaled USD 1.13 Billion for the past quarter, significantly higher than USD 234.3 Million last year.
Lyft Chief Financial Officer Brian Roberts said that Lyft expects losses to peak in 2019.
New Street analysts believe that Uber has the ability to become profitable based off its rapid user growth rate. New Street analyst Pierre Ferragu said on Monday in a note to clients that Uber can potentially reach 7% margin on bookings over time, according to CNBC.
Moreover, Ferragu suggested that Uber’s individual usage is growing and that its monthly active users can grow by three times in the U.S. and by four times internationally. However, Ferragu notes that average ride per user is not growing.