Uber stock investors better buckle up for a bumpy ride
Uber's rough ride as a public company continued Monday after a bumpy initial public offering last week. Shares in the world's largest ride-hailing provider fell 12 percent in afternoon trading, with the stock dropping to $36.88, well under its offer price of $45.
It's rare to see shares in a tech company hit so hard on going public. Over the past five years, just 10% of similar companies finished their first day of trading below their IPO price, said Matt Kennedy, senior IPO market strategist at Renaissance Capital, a manager of IPO-focused funds.
Uber's revenue last year surged 42% to $11.3 billion, but the company admits it could be years before it turns a profit. The company's stock closed Friday at $41.57, while shares in ride-hail competitor Lyft likewise fell about 7%.
Despite Uber's disappointing IPO, many investment pros remain bullish on its future. Ygal Arounian and Daniel Ives of Wedbush Securities estimate the size of the U.S. and global rideshare market at $1.2 trillion and $5.7 trillion, respectively, and underline the potential for growth for both Uber and rival Lyft, whose shares are down nearly 39% from its March initial stock offering.
"We expect Uber to be operating at a loss for at least the next few years, but believe investors should be more patient with Uber's investments as its leadership position will help lead to better long-term competitive positioning for this tech juggernaut, which remains the name of the game although the lack of profitability is a lightening rod issue," they said in a note.