Uber Stock Analysis┃Buy or Sell in 2020?

0:00 What is up guys my name is Blake welcome to nine and five investing my channel where I talk about investments that could be good to make today from a fundamental analysis perspective alright guys so today I'm kind of excited because we're gonna be talking about a very controversial company this is a company that you would have lost a lot of money in if you invested in the IPO several months back this company is uber uber has seen it share its crater from

0:27 45 to as low as 25 fifty-eight now as Warren Buffett says when others are fearful you need to be greedy that's what I'm thinking about doing here so we're gonna look at uber just high-level what they do everyone thinks of them is just a ride-hailing app but they're actually a lot more than that and then we're gonna take a deep dive into the financials so stay tuned guys if you like this content please subscribe oh what do you think of whenever you think of uber almost

0:58 Inevitably unanimously whatever you're gonna think of the ride-hailing app you know it's the app that we call whenever on vacation we need a short ride or you know maybe we have a little bit too much to drink and we need a safe ride home it's great from this perspective so uber rides is actually only one of five business segments that Hoover has and it's actually their only segment that's profitable believe it or not their second segment is uber eats this segment

1:26 Is rapidly growing and for a reason they're spending a lot on advertising and promotional type of things like for example with uber eats you might actually get your first one for free because uber is trying to promote that rather than you know just kind of have it grow on its own they're basically paying for growth in this segment third segment is uber fright basically this is just where uber says to one company hey would you like us to move your stuff okay we'll pay you

1:55 This much they're really emphasizing transparent pricing that does not change once the service starts I think that this will be huge this operating segment is one of the newer operating segments and there's a lot of room for growth here uber has the name think that they're going to easily expand in the and the in the years to come but they're losing money on this as well for cooperating segments it's gonna be just kind of like a net cetera category and this includes like the

2:25 Bikes this includes the scooters that you see I don't know about you guys but I live in San Antonio Texas and overnight it seems like I just see these uber scooters where bikes everywhere around downtown that I don't know if that'll ever be profitable or not I'm not really sure why that's losing money guys but it is what it is and then their fifth business segment perhaps the most interesting does in this segment they're losing a lot of money on this segment

2:54 Guys but it's basically just a technology segment so what they're doing with this they've got so many different projects going on but the main one is autonomous vehicles they're pouring money into basically trying to make it to where they have autonomous driving because their end game is really to take the driver out of the equation on their most profitable well they're only profitable business segments if they're gonna take the driver out of the

3:20 Equation they're really only expense they're looking at guys is gonna be like gasps I mean who knows by then it might just be mostly electric vehicles but there's looking at gas and depreciation on the car and besides that forget it man it's all profit of course it's probably more but you know anyway so those are the five operating segments of uber guys let's go ahead and jump into those financials so guys I just want to take a quick look at these financial

3:48 Statements quick disclaimer all these numbers are pulled from Yahoo Finance except I did annualize the 2019 numbers so that way we're comparing apples apples so obviously that might fluctuate a little bit once we get to actuals in but it's just a good estimate so anyway when we're looking at I mean this is one of the most impressive things about uber right right here got annual growth in that sales is insane so foregoing 2017 you got a one hundred

4:20 And six percent 2018 forty two percent 2019 on track four twenty percent about of course these numbers you know you're not gonna have a hundred percent hundred percent a hundred percent as the sales get more and more and more it's gonna be harder to have those crazy revenue growth numbers but 20 percent I'd say is still great so I mean that's the first trend we see we see really strong sales growth and hopefully that'll eventually translate into profits because that's my

4:51 Next point guys we're looking at uber right here we have a nine billion they're on track to hit a nine billion dollar loss that is insane losing so much money here why are they losing that much money well comes down to two main things from what I can tell we got this research and development expenses and then the selling general administrative expenses so a lot of the times I'm analyzing companies guys I like to look at what percentage of each of these

5:22 Expenses is going into sales so for example research and development for every dollar sales they have they're spending 42 cents on research and development that's basically what that can tell us and then 81 cents on selling general administrative guys what happened here we go from 46% to 81% that's a massive increase definitely a red flag for me don't really understand what's going on there now I'll tell you the thing that isn't a red flag for me

5:53 Is the research and development expense right here I actually kind of like this because I think that they're just plowing so much money into developing autonomous driving so I really don't see that as much of a disadvantage I think that that's kind of if anything it's speculative but it could really pay off one day so those are your expenses really besides your interest expense and interest expense is pretty stable really no bad norm no good there I mean just is

6:28 What it is it's pretty in line with over years I don't see a ballooning and that's a good sign so then we also got the price of sales ratio because uber doesn't make a profit we basically have to resort to using price to sales ratio so all that is is you're just taking stock price and then the sales per share dividing the two and seeing what you come up with normally you want to look for one between one and two a new bers case we have almost four

7:00 So that's really not good it's not as bad as it was one an IP owed but yeah and you are paying for some growth here for sure for sure and guys so I mean when we're looking at the margins we can kind of analyze this here I think the gross profit margin forty eight percent that's pretty good I mean there's nothing to complain about with that but it's when we get to this operating profit margin because of this research development as ga expenses that

7:30 Were really in trouble here so ubers main struggle is gonna be where do we stop investing so much into this or that and how can we cut our expenses because these margins aren't looking good guys all right everyone next I want to take a look at Hooper's balance sheet now right off the top the thing that sticks out to me here is ubers had a massive influx of cash now of course this is because of their IPO but we go from six point four billion to twelve point six billion guys

8:05 That's a massive increase and if there's anything I like about a balance sheet it's a lot of cash because a lot of cash is gonna allow the company to continue performing their operations even if they are at a loss then you know that's okay no I was worried about them going bankrupt I'm not as worried about them doing a secondary offering and making the share price plummet so that's definitely encouraging to me another thing I like to look for in a balance

8:30 Sheet is not too much debt now we do have a lot of debt here but it's not growing at an alarming rate when we went back on the income statement and saw the interest expense that's really not bad so that's in line with long-term debt I'm not too worried about it of course I don't want to see it grow grow grow grow grow but it's nothing that's outlined my opinion finally when we're analyzing a balance sheet I always like to look at a current ratio this business liquidity

8:57 Ratio it's basically saying hey if the company was in a bind if we had a recession or something would they be able to take care of their liabilities that they have enough cash short-term investments etc etc to be able to handle their liabilities and answer with Hoover's yeah absolutely two point six and that's coming from one point four in the prior year so of course guys that's most likely because of the IPO but either way I see it as a huge positive and then we got their debt

9:24 To equity ratio so all this is it's comparing for every dollar a debt how many dollars equity do we have and here we got 1.1 so it's really pretty balanced I'd say the capital structure is good now guys here's the thing I don't put too much weight into the technicals anymore I used to but kind of realized how much more important fundamental analysis is than technical analysis but nonetheless I do think we can use technical analysis just in our overall should we buy here should we buy

9:56 There so the thing is ever since IPO pretty much at least starting in July we have a downtrend and what do I mean by that guys all I'm saying is there are lower highs and lower lows lower highs lower lows ever since ever since that July period basically and so we could draw this trendline and we see that it actually recently broke through this trendline I believe it was on news that they were selling part of their ubereats business in India so we'll see you guys

10:33 This could be a reversal Bluebird stock really for me I see a lot of support which when I say support I mean there's a lot of buyers around this 28 area so guys we have been through what uber does to try to make money I say try cuz they're losing a ton of money we've been for their balance sheet we've been for their income statement we've seen the advantages we've seen the disadvantages again lots of cash lots of solid revenue but at the end of the day they're losing

11:04 Tons of money guys I do have a lot of faith in their CEO their CEOs name is Daraa he came from Expedia and Expedia had an absolutely phenomenal growth and sales and revenue under Dora so I think daraa really knows what he's doing that is actually really like one of the biggest things advantages I see a new purse stock when we're talking outside of like the balance sheet and income statement and so there's only one question left to answer after considering all these factors should you

11:37 Should I invest an uber stock well the answer for you is that you should do your own research use this as maybe just a starting point read further 10-q read through their 10k when it comes out really get to know this company before you risk any money in it guys after doing research I think for me I would hold it as a very small position maybe 5% of my portfolio because at this point I see it as a specular play I don't see them as a large position my portfolio

12:06 Because they're not making money yet guys they're losing tons of money but let's say they get the autonomous driving thing down this company will most likely explode if that happens I don't think there's much doubt to that anyway guys thanks for watching please like this video give it that thumbs up smash that thumbs up button I appreciate it so much guys subscribe if you see value here and have a great day