UBER is Up 23% On Producing Its First Ever Free Cash Flow

Uber Technologies (UBER) produced its first ever free cash flow during Q2, according to its recently released financial report on Aug. 2. This has pushed the stock up 23% in the past 2 days and 29% since the end of July. As of mid-day Aug. 3, UBER stock is over $30 per share, whereas prior to the earnings release the stock closed at $24.60 on Aug. 1

Uber said that its Q2 operating cash flow was $439 million. This was up $780 million year-over-year (YoY). After capex spending, free cash flow was $382 million, also up $780 million YoY.

This is the first time Uber became FCF positive since going public on May 10, 2019, over 3 years ago. This augurs well for Uber's future as its cash burn will stop if the company continues to produce positive free cash flow.

Other Positive Factors

Uber reported that its gross bookings were up 33% YoY. In addition, its revenue was up 105% YoY to $8.073 billion during Q2. As a result, this puts its FCF margin at 4.73% for the quarter (i.e., $382m/$8,073m).

In addition, Uber produced adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $364 million, up $873 million YoY. So both its earnings before interest, taxes, depreciation, amortization (EBITDA), and free cash flow (FCF) are now positive.

This is what has impressed investors in Uber stock.

Another positive factor was the significant gain in its "take rate." Take Rate measures the ratio of revenue to gross bookings. This shows the fees that Uber makes on every order on a percentage basis. The take rate rose to 26.6%. This is its highest ever.

Outlook for Q3

Uber provided a forecast of positive EBITDA for Q3. This also implies that the FCF will stay positive, thereby preventing the company from burning through cash.

However, for the time being, Uber has plenty of cash. It had $4.397 billion in cash and $526 million in investments as of June 30. This totals almost $5 billion ($4.923 billion) for total cash and investments.

The Wall Street Journal wrote that the CEO Dara Khosrowshahi meant business when he talked to employees in May. This included making the company FCF positive. As a result, the market is now very bullish on the stock.

• More Earnings Estimates May Need to be Cut Before Market Bottoms
• Stocks Rally on Strong Economic Data and Easing Taiwan Tensions
• U.S. Stocks Gain as Taiwan Tensions Ease
• Why Investors Must Approach the Spike in Canopy Growth (CGC) Carefully