It’s been a heck of a ride for Uber (Uber Stock Quote, Chart, News NYSE:UBER) over the last few weeks but the stock has showed some life recently, thanks to the company’s assurance that it’s cashed up enough to withstand the current calamity.
And while CEO Dara Khosrowshahi says it’s a matter of being prepared for the worst and hoping for better, shareholders should know that the ride-hailing company has a heck of a cushion in case things keep going south.
Uber’s share price fell as low as $13.71 on Wednesday before pulling up to $21.33 by Friday’s close, representing a spectacular 56 per cent turnaround in two days.
Investors seemingly reacted positively to news from the company that while Uber could see declines of 80 per cent for the rest of the year as the COVID-19 crisis ravages the ride-hailing industry worldwide, the company’s cash position is $10 billion in unrestricted cash, leaving it liquid enough to withstand the losses.
Putting the world on pause will be the ruin of many businesses including Uber where drivers are reportedly seeing a major decline in ride requests. Khosrowshahi said business is down by 60 to 70 per cent in Seattle and expects similar results in other major US cities. In response to the health pandemic,
Uber has now suspended its car pool option to avoid contact between users, while in the UK the company has waived delivery fees for Uber Eats, hoping to support the hard-hit restaurant industry during the COVID-19 crisis.
But Khosrowshahi said countries in the West can look to places like Hong Kong for examples of how the rise and fall of the virus may play out for Americans and others.
Even with its active ties to China, Hong Kong with its seven million people has so far been able to keep confirmed cases of COVID-19 below 200 with only four deaths.
“I think what we're seeing with Hong Kong is there's a big hit but once the health authorities get control of the situation life does return and when life returns essentially Uber returns,” said Khosrowshahi, speaking to Bloomberg News on Thursday. “Instantly in Hong Kong, we've had people going back to work and as they go back to work commuters etcetera start using our services as they always have.”
“And I think if we assume that the health authorities, the cities, the governors, the presidents, all over the world, are making the hard decisions and the necessary moves to control the virus, then eventually life will come back, and when life comes back, when people start going back to work, they're going to start using Uber,” he said.
“And just like in Hong Kong we saw a deep trough and then a slow recovery there's no reason why we won't see that even in a circumstance where you're down 80 per cent of the rest of the year.”
Before COVID-19 started impacting the market, UBER had been on an upswing, buoyed by positive sentiment on the company’s prospects of reaching profitability by the end of 2020. That scenario is out the window now but Khosrowshahi is keeping upbeat on Uber’s position.
We’re still going to have $4 billion of cash, we’re going to have access to a $2 billion revolver. We think it's highly, highly, highly unlikely but we wanted to make sure that our investors knew that we are planning for the worst case, or we're essentially calculating what the worst case is and then that we're operationalizing to make sure that we're ready really for anything,” Khosrowshahi said.