Uber, Lyft Stocks Surge As Americans Splurge On Travel Despite Skyrocketing Inflation

Topline

Shares of Uber skyrocketed Tuesday after the company reported better-than-expected sales and posted its first quarter of positive cash flow despite rising inflation and fears of a looming recession—signaling the strength of American travel demand that has fueled recent gains in shares of rival Lyft and hotel operators Marriott and Hilton.

Uber’s bookings hit a record $29.1 billion in the second quarter—shares are surging 14%.

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Key Facts

Uber shares surged as much as 14% to $28.20 in early trading Tuesday after the company reported record customer bookings of $29.1 billion in the second quarter (up 33% from the past year) and quarterly revenue of $8.1 billion, more than doubling from last year and shooting past expectations of $7.4 billion.

Though the company also posted a $2.6 billion loss—fueled in part by a $1.7 billion hit from Uber’s equity investments—it reported its first-ever quarter of positive cash flow, which climbed $780 million to $382 million in the quarter.

In a post-earnings conference call, Uber CEO Dara Khosrowshahi acknowledged the recovery is “still trailing” in a couple of U.S. cities, especially on the West Coast, but said demand should continue to improve into the second half and noted Uber trips are back to record highs, growing 24% year over year and 12% as compared to 2019.

In a note to clients after the report, Wedbush analyst Dan Ives wrote the surprisingly better-than-expected results bode well for Uber’s ability to produce profits while navigating inflationary pressures in the U.S. and Europe and pockets of driver shortages that still linger in some cities, thanks to travel bouncing back and a growing share of people returning to the office.

“Travel is on fire,” analyst Adam Crisafulli of Vital Knowledge Media said in emailed comments Tuesday, noting that Uber’s resilient rideshare business last quarter should bode well for competitor Lyft (which is similarly surging 13% Tuesday) and that hotel operators Marriott and Hilton have also posted “terrific” second-quarter earnings results thanks to resurgent travel.

Key Background

Shares of transportation and leisure-related firms skyrocketed from pandemic-era lows as travel demand forcefully bounced back last year, but high inflation and fears of a recession this year have hit the industry particularly hard. Uber has plunged 36% this year, while the S&P 500 has fallen about 15%. Now, analysts are hopeful for a turnaround: Of nearly 50 who cover Uber stock, the average price target sits at nearly $48 per share—implying more than 70% upside from current levels.

Surprising Fact

In a report last month, Morningstar analyst Dave Sekera said Uber and Lyft are well positioned to benefit as the pandemic continues to subside, and notes that shares of both companies are trading at some of the “most undervalued levels” relative to other stocks on the market.

Tangent

Shares of Marriott and Hilton have climbed about 15% over the past month—surpassing the S&P’s roughly 10% gain over the same period. In a statement alongside earnings Tuesday, Marriott CEO Anthony Capuano noted demand increased across all customer segments and said the firm’s strong results highlight the recovery’s momentum and “consumers’ love for travel.”

What To Watch For

Lyft is slated to report earnings Thursday after the market closes. Analysts expect the firm will remain unprofitable and post revenue of $988 million, up 42% from one year prior.