The Uber share gained points at the end of the week despite the publication of disappointing group results for the first quarter of 2020. Discover our explanations and advice for this stock.
Solutions that facilitate the recruitment of drivers for its service thereby promoting an increase in the number of drivers could improve the quality of Uber services with a lesser waiting time for passengers, therefore increased popularity and higher profitability over the long term.
The international expansion of the Uber group, notably on certain markets wherein the taxi sector is harshly competitive such as India may also offer interesting growth opportunities.
The introduction of this company onto the stock markets led to new investors and therefore supplementary funds which should enable Uber to develop new services and expand its position on the market.
Uber can also rapidly implement new niche services such as school transport, transporting patients to hospitals, or transporting family pets to a vet and these can provide supplementary sources of income.
The increasing anger from traditional taxi companies due to the competition, judged by them to be disloyal due to the prices charged by Uber and the shorter waiting times, may cause problems for Uber in certain countries.
The Uber drivers may also express their discontentment relating to the reduced profit margins of their activity which draws a negative publicity that can discourage future drivers that may have thought to join the system.
Changes in regulations that forbid Uber from exercising its activities in certain countries could also setback its development.
Finally, and as we explained briefly earlier when listing the weak points of this group, the growing competition that Uber faces could lead to a fall in prices that could contribute to a decrease of drivers.
Let us start this article concerning Uber shares by summarising the precise activities of this company in order to assist you in better understanding the challenges of this activity sector so you can complete improved analyses.
The Uber Group, previously known as UberCab, is a technological company based in the United States that has the main activity of developing and managing mobile applications that enable communications between transport drivers or chauffeurs and their passengers.
The applications created and owned by Uber are used worldwide and therefore present in numerous countries around the world.
One of the particularities of this company is that it has implemented a system offering regular services in the same way as occasional services which has caused it a number of problems.
Uber offers different services including the following:
More recently Uber again diversified its services by offering a meals delivery service named Uber Eats.
Knowing the major competitors of the Uber group will undoubtedly also assist you at better analysing the growth possibilities as although this group was a pioneer in its domain numerous other companies have rapidly jumped into this new market representing fierce and merciless competition.
Completing a comprehensive study of this competition is an essential point if you wish to implement an effective investment strategy of this asset given that all these competitors continue to try and gain a stronger hold over market parts by expanding their services internationally and they don’t hesitate to attack Uber at times with the aim of weakening this company and stop it from gaining a stronger position.
To increase their visibility and position worldwide, the Uber Group has not hesitated to implement a number of partnerships with major companies.As the announcement of these partnerships can have a major impact on this company’s share price it can therefore be extremely useful to follow them closely.Here are three recent examples of partnerships that will assist you in understanding the importance of such alliances.
As you may have noted, these partnerships implemented by Uber touch different sectors and therefore different activities.Depending on the objective of each alliance the effects on the stock market price of each share may be variable and you should therefore carefully evaluate this impact.
We would now like to show you what strengths the Uber share has to support its upward trend.In order to understand this, it is necessary to determine the strengths of the company at the present time.We will now take a closer look at these strengths:
First of all, the solution implemented by the Uber Group has a very interesting evolutionary character.Firstly, the solution implemented by the Uber group is very interesting to evolve.This easy evolution of the services offered should indeed enable Uber to maximize the effectiveness of its international expansion.Taxi services are ubiquitous in every country in the world and the needs are therefore very real, enabling Uber to respond effectively by easily adapting its offer to the specific conditions and constraints of each country.
Uber's facilities in terms of managing its staff, i.e.its drivers, are also an advantage for the group, which can choose qualified drivers and does not have the same constraints as other companies.It should be remembered that Uber's system is based on self-employed and self-employed drivers, which also limits labour costs.Similarly, the group's operating costs are also very low with the absence of certain needs, since the interaction between drivers and customers is only done through the mobile application.
With regard to the group's business model, another undeniable advantage of Uber is the ability to offer an easy and clear service to users.In particular, users know the price of the race in advance and can order a vehicle at any time.
The value of this company is another advantage that you should take into account.Indeed, significant sums have been paid by investors in this company, which gives it the opportunity to develop more significantly and to expand its business around the world through investments in research and innovation in particular.
The policy of low fares compared to the offers of classic taxis is another of the strengths of the Uber model and allows it to easily win new customers.
Finally, account will also be taken of the Group's well thought-out strategy of diversifying its activities.Following the creation of Uber Eats in the field of meals-on-wheels delivery, it is likely that the group will soon set up other services of this kind, building on its know-how and efficient model.
While the Uber group seems to have many assets that should enable it to grow and thus raise its share price on the stock market, it also has a number of shortcomings that we suggest you discover here in more detail thanks to the list of its current weak points.
First of all, the ethical issues surrounding Uber's relationship with its drivers remain at the heart of investors' concerns.Indeed, this business model based on the employment of self-employed rather than salaried employees has been the subject of much debate in recent years and although Uber has made real efforts in this direction, it is not impossible that new social movements will disrupt its activity in the years to come.
Similarly, there is no real link and loyalty programme between Uber and its passenger customers, which could lead to their flight to a potential competitor and in particular to competitors with lower prices or higher quality services.
Laws and regulations in the markets in which the Uber group operates may hinder its growth because of the constraints they impose.These rules differ from one country to another and Uber is obliged to adapt to them as best it can.
Account will also be taken of the arrival on the market of new competitors to Uber, which no longer enjoys a monopoly in this sector of activity.The low barriers to entry make it easy for new players to enter the market, which of course limits Uber's growth opportunities.
Finally, and despite operations aimed at simplifying this problem, such as the partnership with BNP Paribas bank that we presented to you above, the fact that Uber drivers have to finance the purchase of their vehicles themselves may prove to be a major obstacle to the strong development of this business.
Among the current large shareholders of the Uber Group we find the following: The SB Investment Advisers Group with 26.1%, Benchmark Capital Management which holds 8.83%, Public Investment Fund with 8.57%, Travis Kalanick that holds 5.78%, Expa Capital with 4.80%, TPG Group Holdings with 4.29%, GV Management that holds 4.18%, Goldman Sachs Asset Management with 3.51%, Dragoneer Investment Group with 2.50% and Lowercase Capital that holds 2.47%.
It was in May 2019 that the Uber Group made a partial IPO through which it managed to raise 8.1 billion dollars with a total capital of 82 billion dollars. This in fact is one of the top ten largest IPOs in the United States even though its value turned out to be less than the amount foreseen which was for around 90 billion dollars.
The advanced tax model developed by Uber has been criticised by journalists that have publicised the fact that the company uses complex financial arrangements that are international in a manner of speaking, but notably through the Netherlands. These arrangements are particularly destined to reduce the amount of tax paid by Uber that still respect the taxation laws of the different countries where this company exercises its activities. These arrangements are therefore entirely legal.
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