While the broad market didn't exhibit significant weakness before late last year, Uber Technologies, Inc. ( NYSE: UBER ) peaked as early as Q1 2021.
Even with significant revenue growth, as per the latest, the company still doesn't generate positive cash flow, which doesn't fare well given that the market is – by all metrics – in a recession.
Let There be Uber Leaks
In the aftermath of the COVID-19 pandemic, UBER reported a commendable recovery, posting an all-time high in revenues and solid growth. Despite strong growth (+18% YoY Q1), the company recorded a loss due to unrealized losses in its investments in Grab, Aurora, and DiDi.
While these attributed to almost US$6b, even without them, the company would have been slightly below break-even, questioning the reality behind the valuation that still exceeds US$40b. With the recession officially underway (courtesy of the negative GDP for 2 consecutive quarters + S&P 500 correcting 20% from its peak), it is hard to look past high valuations with companies still burning cash.
Yet, Uber has accomplished much through its global expansion over the years, securing the leading ridesharing spot globally. Unfortunately however, the ugly nature of cloak and dagger corporate operations presented itself in a new light after a most recent document leak.
Over 124,000 confidential files were leaked to the Guardian, exposing the scale of lobbying operations during the times when its CEO was still its co-founder, Travis Kalanick. These files point to communication with some of the highest-ranking government officials, including Joe Biden, Emmanuel Macron, and Olaf Scholz.
Current CEO Dara Khosrowshahi noted that this past behavior is not in line with their present values, asking the public to judge the company by what they've done during his tenure in the last 5 years.
What Is Uber Technologies' Net Debt?
You can click the graphic below for the historical numbers, but it shows that as of March 2022, Uber Technologies had US$9.53b of debt, an increase of US$7.83b over one year. However, it also had US$4.18b in cash, so its net debt is US$5.35b.
How Healthy Is Uber Technologies' Balance Sheet?
We can see from the most recent balance sheet that Uber Technologies had liabilities of US$8.65b falling due within a year and liabilities of US$14.3b due beyond that. Offsetting these obligations, it had cash of US$4.18b and receivables valued at US$3.09b due within 12 months. So its liabilities total US$15.7b more than the combination of its cash and short-term receivables.
While this might seem like a lot, it isn't so bad since Uber Technologies has a huge market capitalization of US$41.6b, so it could probably strengthen its balance sheet by raising capital if needed. However, it is still worthwhile taking a close look at its ability to pay off debt. I t is future earnings, more than anything, that will determine Uber Technologies' ability to maintain a healthy balance sheet. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts interesting.
Share Issuing Remains an Issue
Over the last few years, Uber has relied on issuing shares for raising funds and stock-based compensation. Yet, since the IPO in 2019, the dilution has exceeded 50% - which is concerning.
Meanwhile, despite an outlier of 2019 (the year of the IPO), stock-based compensation has been slightly rising. Given the expectations for the incoming year, it is unlikely this will slow down. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through US$108m of cash over the last year.
The balance sheet is the area to focus on when analyzing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 1 warning sign for Uber Technologies you should know about.
If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet .
Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.