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Here’s what analysts see

Uber CEO Dara Khosrowshahi speaks at a product launch event in San Francisco, California on September 26, 2019.

Philip Pacheco | AFP via Getty Images

Uber will report first-quarter earnings after Wednesday, and Wall Street notes for investors provide insight into what investors can expect.

The latest financial figures come after what appeared to be a challenging quarter for the company. Shares have fallen more than 26% year-to-date as inflation challenged consumers, the spread of the omicron coronavirus variant and rising gas prices weighed on the stock.

Here’s what Wall Street sees this quarter:

Are Uber riders coming back?

Uber is likely to return from any low point for omicron riders. In an application to the SEC in March, Uber said that mobility demand improved significantly through the month of February. Travel was 90% restored from the February 2019 levels. That led the company to raise its EBITDA guide for the first quarter by $ 25 million in the middle to $ 130 million- $ 150 million from $ 100 million- $ 130 million.

“Unlike most other sub-sectors of the Internet, rideshare Q1 results should be solid based on robust mobility trends,” Alliance Bernstein analysts said in a earnings test. Investors will keep an eye on regional recovery trends as APAC growth is likely to lag behind an increase in Covid. Its European market may also see too much influence from the war and inflation, analysts said.

How have fuel prices affected drivers?

As gas prices skyrocketed across the country due to the war in Ukraine, many feared that drivers would flee from concert work in favor of other jobs. Some supply and interconnection companies struggled with supply and demand imbalances from the pandemic, so further strain or a setback could have hampered the economy.

Uber, for its part, implemented a temporary fuel surcharge. It is set to expire soon, so investors will look for color on if it kept drivers and if the company plans to extend the incentive. Gas prices averaged $ 4.19 per gallon. gallon Monday compared to $ 2.9 a year ago, according to data from AAA.

Still, the majority of drivers believe the surcharge was not enough, and some analysts say the recovery in driver supply has slowed. “We believe the risk to drivers’ supply and take rate is increased and our proprietary price tracking data indicates that driving prices and waiting times were up in April compared to Q1,” Bank of America analysts said in a note.

Should Uber increase incentives?

As mobility grows, Uber may have to implement additional short-term driver incentives due to high gas prices and a need to rebalance supply and demand.

The company spent millions last year trying to bring drivers back as states eased Covid restrictions and vaccinations were widely available. But these incentives weigh on its balance sheet, and investors have consistently been concerned about costly efforts to bring drivers back.

“For Q2, the risk is that Uber may have to add to short-term driver incentives to adjust for positive demand recovery and gas prices,” Bank of America analysts wrote. Still, the incentives may not be as expensive as in 2021, Alliance Bernstein analysts speculated.

How far can the delivery go?

Uber’s delivery business had enabled the company to withstand Covid headwinds as people began ordering more at home during the pandemic. In recent quarters, it has emerged that the segment, which includes its Uber Eats business, has continued to hold up as food delivery becomes a part of ordinary life.

But how long can delivery grow? “After a series of estimates that go across the cohort of pandemic winners, the looming concern is that food delivery will miss the target in Q1,” Alliance Bernstein analysts said.

Uber said in the March filing that year-on-year gross bookings for delivery reached a record high in February, meaning it may be necessary to look elsewhere to grow.

“New customer additions are likely to decline, but we believe the order frequency may still be a driver of growth,” analysts said.

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