Then Uber said working for us is a privilege meme

Uber’s Seismic Privilege

Great Ones, today we’re going to talk about “privilege.”

You better watch your step, Mr. Great Stuff…

Not that kind of “privilege.” You think I want my inbox to explode with the force of a thousand suns?

No, we’re talking about an email Uber Technologies (NYSE: UBER) CEO Dara Khosrowshahi (Bless you!) sent to employees on Sunday night … one obtained by CNBC.

The email begins by detailing Khosrowshahi’s realization that there has been a “seismic shift” in the market:

After earnings, I spent several days meeting investors in New York and Boston. It’s clear that the market is experiencing a seismic shift and we need to react accordingly.
What I'd miss keep Greatness flowing meme

It’s about time you caught up with the rest of Wall Street, man. The cost of everything is going through the roof, including labor … which happens to be a sore spot for Uber lately.

So, what is Uber going to do about it?

We have to make sure our unit economics work before we go big. The least efficient marketing and incentive spend will be pulled back. We are serving multi-trillion dollar markets, but market size is irrelevant if it doesn’t translate into profit.

No $#!&, Sherlock. So Uber is going to massively cut spending, huh? I just love the classics, don’t you?

It seems like the right course of action when you’re bleeding money, yes.

And bleeding money Uber is. The company lost $5.9 billion in its last earnings report. And that’s $5.9 billion last quarter … not last year. Furthermore, Uber has never had a profitable quarter. Period.

Now, cutting spending is all well and good … but we all know you need to spend some money to make money. In other words, what matters is where you cut spending. Which leads us to one of the most tone-deaf quotes from a CEO I’ve ever read:

We will treat hiring as a privilege and be deliberate about when and where we add headcount.

Treat hiring as a “privilege?” As in … you’re privileged to drive for us as we actively lobby governments to allow us to pay you as little as legally possible? That kind of “privilege?”

Does Uber not know about the Great Resignation? When I saw “seismic shift” in the market, that’s what I thought Khosrowshahi was talking about.

And then I remembered that Uber doesn’t consider drivers “employees” in most of the areas in which it operates. They are contractors.

In other words, this “privilege” doesn’t seem to be directed at drivers … but that’s not going to stop drivers from interpreting it that way. That’s a consumer sentiment hit Uber really doesn’t need right now, intentional or not.

Still, it sounds good to Wall Street investors … which is all that really matters, right?

But don’t worry, investors. Khosrowshahi had some disturbing news for you too:

We have made a ton of progress in terms of profitability, setting a target for $5 billion in Adjusted EBITDA in 2024, but the goalposts have changed. Now it’s about free cash flow. We can (and should) get there fast.

First, the assertion that Uber has made a “ton of progress” toward profitability is a rather ballsy statement to make right after the company lost $5.9 billion in a quarter. It’s laughable at best, but that’s not even the real issue here…

Uber worry about earnings doesn't seem fair meme

The real issue is that Uber is giving up on adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) as a measurement of growth, success and profitability.

EBITDA is a Wall Street standard measurement for profitability, and practically every analyst worth their salt uses it as a guide.

But Uber is throwing that old Wall Street standard out the window and replacing it with free cash flow.

Basically, free cash flow is the money a company has left after paying for operating expenses and capital expenditures. High free cash flow can allow a company to increase dividends, buy back stock and pay down debt.

However, while free cash flow can be a precursor to strong earnings … it’s not the same as earnings or EBITDA at all.

Why would Uber make this “seismic shift” in accounting? Because the company knows that it’s been operating at massive losses this entire time. And Uber’s moving the goal posts now because it knows it will continue to operate at a massive loss for the foreseeable future.

Even if Uber achieves positive free cash flow, that doesn’t mean that it can pay down its debt … let alone have anything left over to return to investors.

Now, I’m not the first one to come to this conclusion … not by a long shot. Heck, my colleague Ted Bauman talked about this back in November, calling Uber, Lyft and DoorDash “dead men walking.”

Suffice it to say that Sunday’s email from Khosrowshahi opened my eyes on the whole ride-hailing/delivery market. We already knew how they treated their contracted drivers. Now we know how they treat their financials … and it isn’t pretty.

The bottom line here is that Uber and its ilk might be worthwhile for day trading or short-term speculative investing … if you have the risk tolerance. But for long-term buy-and-hold investing? I’m noping right out of there.

“Two Stars. Would not invest again.” — Mr. Great Stuff.

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The Good: BioNTech Gets A Boost

BioNtech amazing earnings Wall Street gif

You wouldn’t necessarily know it by looking at BioNTech’s (Nasdaq: BNTX) conservative 4% jump today, but the biotech company crushed quarterly earnings — thanks to ongoing COVID-19 concerns keeping much of the developed world on edge.

BioNTech reported earnings of €14.24 per share on revenue of €6.37 billion — well ahead of Wall Street’s earnings estimate for €9.16 per share on revenue of €4.34 billion.

For the full year, BioNTech reiterated its outlook of revenue in the €13 billion to €17 billion range and said that it will move forward with its plan to buy back up to $1.5 billion worth of its stock over the next two years.

If you had any doubt as to where this optimistic outlook came from, BioNTech made clear it “was mainly due to increased commercial revenues from the supply and sales of the company’s COVID-19 vaccine worldwide.”

The bottom line is that plenty of people are still taking precautions by boosting themselves with BioNTech’s vaccine, which it made with the help of Big Pharma giant Pfizer (NYSE: PFE).

With a profitable prognosis, BioNTech is looking safe for the foreseeable future — a sentiment not many other companies can sell these days.

The Bad: Palantir Face-Plants

Palantir government vs commercial contracts meme

You’d think with all the current geopolitical unrest going on in the world that Palantir Technologies (NYSE: PLTR) would’ve reported more profitability when it stepped into the earnings confessional today.

I mean, the company literally lends the U.S. intelligence community and its allies its private eyes (i.e., data analytics software) to help keep massive amounts of intelligence data safe.

And one could argue that thanks to a certain someone — *cough Russia cough* — those stakes have gotten considerably higher here as of late.

So I was a little surprised when Palantir reported government revenue that fell several million dollars short of Wall Street’s consensus forecast (even though it did still grow government revenue 16% this quarter).

To that end, Palantir professed it still has “a wide range of potential upside to [its] guidance” thanks to Russia’s war with Ukraine. But that still didn’t stop investors from punishing the stock after learning overall revenue came up just shy of the company’s own $447 million Q1 target.

Now, I’ve told you before that Palantir can’t live off government contracts alone — which is why the company developed Palantir Foundry for the public sector. And as it happens, Foundry forged way ahead of Wall Street’s $193 million forecast this quarter, with commercial revenue climbing 54% to $205 million.

Despite Palantir’s otherwise paltry update, this is something PLTR investors should take note of. After all, commercial — not government — revenue is the key to Palantir’s future success, even if geopolitical tensions end up growing Palantir’s government profits in the short term.

If you’re a longer-looking buy-and-hold investor, I still think Palantir could pay off … it just might require more patience than most people are willing to exercise.

The Ugly: Ford’s Fed Up

Ford Amazon Rivian investors gif

The Great Stuff Team and I have been taking bets as to whether Ford (NYSE: F) or Amazon (Nasdaq: AMZN) would pull the plug on their Rivian (Nasdaq: RIVN) investments first … and it looks like Ford has finally caved under a growing mountain of pressure.

The don of Detroit announced it’s selling 8 million of its 102 million share stake in the rival electric vehicle (EV) maker, signaling the first of what could be many dominos to fall under the rush of Rivian’s rip tide.

I can’t say news of today’s sale came as any big surprise… I mean, did you see Ford’s first-quarter earnings? The one where its marginal double beat turned into a massive $3.1 billion adjusted loss when accounting for Ford’s Rivian investment?

Yeah. So much for Ford becoming the EV force all those Tesla (Nasdaq: TSLA) bulls needed to fear. I can almost hear the maniacal laughter from here … and I live in the middle of nowhere.

So far as speculative bets are concerned, Rivian is as risky as they come. And in this kind of market environment, risk is the literal last thing that anyone wants on their plate — even the Big Tech players like Amazon.

This explains why AMZN stock is sinking slowly into the red this morning along with Rivian and Ford, as many investors brace themselves for a future in which Amazon follows Ford’s lead (something I never thought I’d type).

If you yourself are invested in either Amazon, Ford or Rivian … rally your resolve now because there’s bound to be more pain to come.

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Chart of the week

Oh, you better believe it’s earnings time again!

We might be through the thick of Big Tech’s reports … and the smaller tech names’ reports … and also the non-tech names too. Man, earnings season’s going fast.

But the show ain’t over yet! Just check out the slate of companies reporting this week, courtesy of Earnings Whispers on Twitter:

Earnings May 9 2022 chart

Great Stuff Picks investors … it’s time!

By the time you read this, Plug Power (Nasdaq: PLUG) will have its report in the books, filling Wall Street with hopes and hype of a hydrogen-powered future … or something like that. (Hey, a Great One can dream.)

Considering how the market has treated literally everything related to growth lately, I am ready once again for Mr. Market to miss the nuance on Plug’s report come tomorrow morn.

PLUG’s not the only Great Stuff Pick in the earnings confessional this week. Check out Coinbase (Nasdaq: COIN), especially if you actually own cryptocurrencies. What we’re looking for here is trading revenue — after all, if people aren’t trading cryptos, Coinbase ain’t making money on transactions.

Options traders expect COIN stock to move 15.5% — in either direction, mind you. So should Coinbase strike it big on this quarter’s bitcoin blowout … there goes COIN stock. Bang, zoom! To the moon, Great Ones!

Silly Great Stuff. Stocks don’t go up anymore…

Well, not with that attitude. Gosh.

Now, the House of Mouse is reporting Wednesday. As far as Walt Disney’s (NYSE: DIS) report is concerned, the market expects a 6.6% move … much less volatile than some of the other stocks reporting this week.

Someone such as, I don’t know, Peloton (Nasdaq: PTON)?

When the wannabe-fitness company reports earnings on Tuesday, investors should be looking for any and every sign of a potential Peloton turnaround.

Options traders are expecting PTON stock to either rally or fall 20%. Considering how the stock has dropped literally every time Peloton’s management opens their mouth … I have a feelin’ that PTON will be left reelin’.

Kinda like how Rivian was left reelin’ after this morning’s sell-off. And we haven’t even gotten to poor Rivian’s earnings report yet. Oof. Options traders expect RIVN stock to move 16% after earnings, and I don’t have to tell you which way this wind’s blowin’…

Which reports are you looking forward to most, Great Ones? Got any earnings trades in your sights this week?

Send me your thoughts at Otherwise, here’s where else you can find

Until next time, stay Great!

Joseph Hargett. Editor of Great Stuff

Joseph Hargett
Editor, Great Stuff