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Uber’s shares slid as much as 8 per cent on Thursday, as it said higher prices for its ride-hailing service in the US were putting the brakes on its growth rate.
Dara Khosrowshahi, Uber’s chief executive, said consumer demand “continues to be strong”, as it reported revenue growth of 20 per cent in the third quarter.
However, Uber’s forecast for customer spending on its platform fell slightly short of Wall Street’s estimates, with a slower growth rate than in recent quarters.
On a call with analysts, Khosrowshahi acknowledged that having to pass on “substantial increases” in Uber’s insurance costs in the form of higher prices was damping demand in some areas, including its home market of California. “As price goes up, the transaction growth slows down a bit,” he said.
Motor vehicle insurance costs have risen sharply in the US over the past two years and Uber said it expected them to continue to increase, albeit at a slower rate next year.
“We are seeing weekday growth stronger than weekend growth,” Khosrowshahi added. “The weekend party hours, maybe consumers are a little more price sensitive in terms of whether they choose to go out or not. But weekday is very strong.”
In its outlook, Uber said it expected gross bookings — a measure of customers’ total spending across all its business units — would be between $42.75bn and $44.25bn in the fourth quarter, compared with the $43.7bn analysts had forecast, according to Visible Alpha data.
That would represent a 16 to 20 per cent growth rate on a constant currency basis, Uber said, compared with 20 per cent gross bookings growth in the third quarter.
Khosrowshahi pointed to “solid results in our core business alongside substantial progress in our new product portfolio and our autonomous strategy”.
Revenue of $11.2bn for the three months to September was just ahead of analysts’ expectations and up from $9.3bn in the same three-month period a year earlier, the San Francisco-based company said.
Operating income jumped to $1.1bn from $394mn, far ahead of the average estimate, as bookings increased 16 per cent and its monthly users reached 161mn, up from 142mn last year.
Uber has struck partnerships with Google’s Waymo self-driving taxi service and General Motors’ rival Cruise, as well as introducing new ventures such as teen accounts, hiring motorbikes and the ability to reserve cars in advance.
In recent years, Uber has expanded from its ride-hailing roots into train and flight bookings, food delivery, corporate logistics and advertising as it seeks to transform itself into a consumer “super app” that takes an ever-larger share of consumer spending and the resultant commissions.
Boosted by a more than 80 per cent rise in its stock price this year and more than $9bn of cash, Uber recently explored a bid for $20bn US travel booking website Expedia, the Financial Times reported this month. Khosrowshahi ran Expedia for 12 years before Uber and current executive chair Barry Diller is his mentor.
Chief financial officer Prashanth Mahendra-Rajah said on Thursday that the company continued to “selectively evaluate acquisition opportunities”, but had “a high bar for any M&A”.
Investors have been watching companies such as Uber for signals on US consumer spending, amid inflationary pressures and the potential turmoil of a knife-edge presidential election.
“For now, all the consumer signs are strong,” Khosrowshahi said. “And we are certainly hoping they stay that way.”
Bookings at Uber’s core ride-hailing service grew 24 per cent, while food and grocery deliveries rose 17 per cent. Freight bookings grew much slower, at 2 per cent.
Khosrowshahi said there was still room for Uber to grow. “It’s a common misconception that almost everyone already uses Uber,” he said. “We are taking a more active approach to unlocking less dense suburban and secondary markets, in both the US and abroad.”
Uber reported $1.7bn in unrealised gains on the carrying value of its $7.9bn portfolio of equity investments, which include self-driving car company Aurora, Chinese ride-hailing group DiDi and food delivery services Grab and Delivery Hero. This caused its net income to increase almost 12-fold to $2.6bn from $219mn.
Looking ahead, Uber said it expected its adjusted earnings before interest, tax, depreciation and amortisation — its preferred profit measure — to be between $1.78bn and $1.88bn in the current quarter to the end of December. Analysts were expecting $1.84bn, according to estimates collected by Visible Alpha.
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