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Uber, The Most Anticipated IPO of the Year Fails to Live Up to Its Hype

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When lunched, Uber Technologies Inc. (NYSE: UBER) was set to create a world where a modern family does not have to own two cars because it is cheaper and more convenient to get a taxi-like vehicle to commute to work or to run errands. And by the looks of it, it is making an impact on many everyday lives worldwide as Uber reported 91 million consumers in 2018 who use its app for a ride or meal in a given month. A year earlier, it was 68 million.

Although Uber was launched as an on-demand equivalent to taxis, the company’s business has since taken on many different forms. In addition to offering ride-hailing services via cars, the company has its “New Mobility” offerings, which encompass bike and scooter options, and the company also operates a food delivery business.

But, things are not looking great for the ride-hailing giant as far as financial figures go. Uber recorded revenues of $11.3 billion in 2018, which is an impressive increase of 43% from $7.9 billion in 2017. But when you consider that Uber’s revenue more than doubled in 2017,  it is clear that the company’s growth rate is slowing considerably. The trends are similar for the core platform as well.

But the bottom line is that Uber lost about $3 billion in 2018 and its losses over the past three years amount to $10 billion. As for the first quarter of 2019, Uber disclosed in its latest filing that it lost at least $1 billion.

Uber is losing money, but that’s attributable, in part, to a lack of viable autonomous driving technology. When cars drive themselves, Uber will be able to charge less and decrease the cost of ride-hailing services. It is expecting be the leading platform in a new and growing business. On one hand, the car business is so large, Uber just needs to be a little bit more successful to justify a multibillion-dollar valuation as it measures its total addressable market—for freight, ride-hailing and food delivery—to be in the multitrillion-dollar range. But, what if this autonomous technology is not developed quickly enough?

On the other hand, Uber drivers are classified as independent contractors. If they were employees, Uber would have additional costs for compliance, insurance and employee benefits and this is a great concern for its management. Additionally, don’t forget that Uber doesn’t have a great relationship with its drivers, and the company assumes that this dynamic is about to get worse.

Uber has reputational issues to tackle since its co-founder Travis Kalanick was forced to resign in 2017. He was blamed for creating a toxic culture at the company which resulted in Uber dealing with spying and sexual assault claims. So there is a lot more to do, besides a transparency report that is announced to be released this year. And things have gone south after its IPO on Friday.

Disappointing IPO Debut

Some investors struggle with valuations of startup companies as after all, many new companies lose money in the early phase of their existence, and that can make valuing them difficult. But that’s why Wall Street analysts usually put a target multiple on a company’s sales to derive a price target. But going public did not go well  for Uber, as CNN called it perhaps the biggest IPO bust in history as no company was as well known, raised as much money, shown as much promise and then performed so poorly.

The company priced its stock at $45 per share but shares of Uber) ended its first day of trading on Friday at $41.60, down $3.40, or 7.6%, from its offering price. The stock kept falling on Monday, to be down 7.9% in morning trade. The second day ended as an abysmal too, as Uber closed it trading down more than 18.8% from its IPO price at $37.25 per share, with a market cap of $62.2 billion. This is half of the value that Uber was valued by private investors which was $120 million, so the most anticipated initial public offering in years clearly failed to live up to its hype.

What can Uber CEO Dara Khosrowshahi say but try to remind its employees about the comebacks both Facebook and Amazon made post their disappointing IPOs. There’s always hope and creativity, but investors aren’t blind to losses.

Uber has also its competitors to think about which can only make investors even more worried. Let’s not forget its U.S. rival Lyft Inc. (NASDAQ: LYFT) that is merely set out to  “to improve people’s lives with the world’s best transportation.” But Lyft has similarly suffered with its IPO in March. Lyft closed the day at $48.15, with a market cap of $13.8 billion. But, Lyft has only slid lower since its March 29 debut, with shares now trading about 33% below their $72 IPO price. But it should be noted that Uber operates in more than 60 countries so its metrics cannot be directly related to those of  Lyft Inc which besides the U.S., covers only 9 cities in Canada. Lyft also doesn’t have a food-delivery business. But Uber’s food delivery business, Uber Eats is in direct competition against Grubhub Inc (NYSE: GRUB) and Square Inc.’s (NYSE: SQ) Caviar.

Bottom line is that nonfinancial or qualitative metrics are also very important for understanding Uber. The company operates in 63 countries and disclosed that only 2% of those who live in these places have actually tried the company’s services so Uber certainly has a lot of opportunities and potential ahead. But there are many bumps and issues to tackle as the company has fallen to its lowest valuation since July 2015.

 

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Earnings

Toyota’s News: Redesigned Corolla, New Investments and Partnerships

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Toyota Stock Market News

Toyota Motor Corporation (NYSE: TM) is managing something other automakers only dream of. The company is honouring its values while achieving sustainable growth for over a decade. The dependable Japanese giant continues to deliver on its promises as it prepares for an electric future.

A new sturdy yet sporty Corolla

On September 17th, the company announced a completely redesigned Corolla that now goes beyond just being a practical buying decision. The newly evolved Corolla has a sporty design, offering pleasurable driving and advanced safety equipment. Being built on Toyota New Global Architecture (TNGA), Corolla is ready to evolve to meet customers’ needs, according to Yasushi Ueda, chief engineer in charge of development.

Since its debut in 1966, this car is nothing less than adored by consumers all over the world and now, it will have its first hybrid version available to U.S. customers.

Hybrid strategy is actually paying off

Just like Honda Motor Co. (NYSE:HMC) with its 2020 CR-V Hybrid, Toyota is using its hybrid technology to position itself for future growth and transition to an all-electric future, despite the fact these energy saving vehicles do not qualify for government subsidies. But, this strategy is paying off as hybrid demand skyrocketed and the company proudly revealed in February that Lexus reached its 10 millionth vehicle sales milestone since its launch, with its 2018 sales performance achieving several ‘best-ever records’. And it is thanks to these figures that the Chinese government is also starting to see the potential of such vehicles so things can only get even better for Toyota. As the saying goes, persistence is the key to success and these two companies have been quite brave in sticking to HEVs.

New Investment – $391 Million Goes to Texas’ San Antonio Plant

This will be Toyota’s first expansion in nine years at the plant that produces its Tundra and Tacoma pickup trucks. It is the part of the company’s strategy to invest $13 billion in its U.S. operations over the period of five years, ending in 2021.

Future Investment – $243.29 million to Produce New Vehicle in Sao Paulo

Toyota is also about to get an even stronger presence in Brazil as it will hire 300 new employees at the Sorocaba Plant to start the production of a new vehicle.

Partnership

And let’s not forget the ground-breaking partnership of Japan’s leading automakers that was revealed in August as Toyota and Suzuki Motor Co. (OTC: SZKMF) announced they will collaborate on developing autonomous car technology. This deal is cementing the bond that the two automakers kicked-off in 2016. They might seem like an odd couple as Suzuki is a everything but a big player, yet its strong presence in India is only one of the things that will greatly benefit Toyota. Although Suzuki admitted defeat on the world’s biggest playgrounds, China and the U.S., it cracked the code for emerging markets. And this is exactly where future global sales growth is expected to come from.

Inventing a car that will run forever?

According to Bloomberg, Toyota aims to go far further than electric by teaming up with Sharp Corporation (OTC:SHCAY) and Japanese governmental organization NEDO that encourages the development of innovative technologies. Considering that Toyota is a company that has even used the economic crisis and recession to only come out stronger, it’s not unlikely that it is set to out do the impossible by mixing the most efficient batteries with solar panels. The company’s strong financial performance and track record show that if anyone can do it, it’s Toyota Motor Co.

 

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Nike Exceeds Wall Street Expectations With Q1 Earnings for FY2020

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Direct-to-consumer sales and digital momentum strategies did the trick for Nike

When Nike (NYSE:NKE) released its better-than-expected first quarter of the fiscal 2020 results late Tuesday. Naturally shares jumped more than 5% to reach $91.80. The reported revenue increased 7.2% year comparing to last year, achieving $10.7 billion, greater than the expected $10.44 billion. Net income soared more than 28%, making adjusted earnings per share $0.86, also smashing expectations of $0.70 per share.

Nike managed to achieve a turnaround

The biggest contributor to total sales was Nike’s North American segment that increased 4% comparing to last year. But China sales also continue to grow and by double digit percentages: 22% to be exact, topping $1.68 billion. Overall, these are fantastic news for investors. Especially since the company’s rare earnings miss for the final quarter of the previous fiscal year. The company attributed this to increased marketing costs and a higher tax rate. But highly anticipated new product launches and solid results for continuing lines, along with efforts to draw new customers to the Nike SNKRS app, did their magic.

Digital momentum is key

Digital movement is transforming and amplifying everything Nike does and in Q1, Nike Digital grew 42% on a currency neutral basis. This growth is driven by enhanced digital services and the international expansion of its app ecosystem. Moreover, The Nike app and SNKRS app are now both live in over 20 countries, with more expansion coming throughout the year.

There are literally no weak spots for investors

Arguably, there are no weak spots for prudent investors to dig in as far as this quarter’s report is concerned. The company is literally firing on all cylinders. The company’s management attributes these results to “the depth and balance of the company’s complete offense, building on the strengths of its foundational business drivers and capitalizing on the untapped dimensions of its portfolio”. Management has also dismissed any concerns that US-China trade conflicts could harm its operations, disclosing no impact has been seen up to date.

Nike showed it can even handle the increased tariffs

Earlier this year Nike joined over 200 other footwear companies urging President Trump not to increase tariffs on footwear imported from China, calling the move “catastrophic for our consumers, our companies, and the American economy as a whole.” But while those tariffs are certainly catastrophic for small players, Nike seems more than capable of mitigating the consequences of this added expense.

Poor macroeconomic conditions are only masking Nike’s true power

The company made it clear that its figures would have been even stronger had it not been for macroeconomic challenges which are manifesting through tariffs and foreign-exchange rates. They implied that the weakening economic climate is essentially masking Nike’s true strength. And in addition to children, women are also a big opportunity for the company that Nike will continue exploiting. This is why Nike expects better-than-planned growth in its higher-margin NIKE Direct channels and international segments and consequently, its full-year gross margin. One thing is for sure: Nike has turned itself into so much more than a ‘sneaker-company’.

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Apple Will Be Making Its MacBook Pros in the US

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With a newly granted “federal product exclusion,” enabling it to import some Mac Pro parts without paying tariffs, Apple (NASDAQ: AAPL) will be able to save enough money to make US assembly worthwhile. The company announced on Monday that it will manufacture the new version of its Mac Pro desktop computer in Austin, Texas. It’s also a big political win for Apple, since President Trump has for years called on the company to make more products in the US. Tim Cook clearly made a compelling case during his meetings with President Trump. Apple described the decision to keep Mac Pro production in Austin as part of its “commitment to US economic growth.”

Macroeconomic climate is not favourable

The September figures around the world are simply awful. The uncertainty brought on by intensifying trade wars, the outlook for the car industry and Brexit are paralyzing investors, with September seeing some of the worst performance since the financial crisis in 2009, leading many to worry about whether yet another crisis is upon us. On a brighter note, Apple’s stock went up 0.2% after Bloomberg reported that ten of its 15 requests for an exemption from tariffs on imports from China had been approved.

New investments

Apple previously disclosed plans to spend $350 billion in the U.S. by 2023, a figure that includes new and existing investments. Its Apple TV+ is set to launch on November 1, with stars like Oprah Winfrey bringing her famed book club streaming show to the company’s subscription service. Among documentaries that will be released, there will even be a multi-series about mental health, featuring no other than Prince Harry himself. Apple’s subscription service will cost only $4.99 a month and will be available in 100 countries and regions at launch. Also, customers who buy a new Apple device will also get a free year of Apple TV+.

Competitors

Netflix (NASDAQ: NFLX) is still the leader when it comes to U.S. streaming, along with Amazon Prime (NASDAQ:AMZN), AT&T’s HBO (NYSE: T) and upcoming Disney+ (NYSE:DIS), it is certain that competition will be intense. Netflix’s stock has been dropping since July, which was the first time the number of subscribers fell. Moreover, Netflix’s stock price has now officially wiped out any gains it’s made over the year so far and both Disney and Apple have a shot at beating Netflix at its own game.

Apple is still facing impending import duties and innovation difficulties

Let’s not forget that the company still faces import duties scheduled for Dec. 15 that could affect nearly all of its major products including iPhones, iPads, MacBooks and Apple Watches. And more importantly, it is thought by many as facing an innovation problem so it heavily relies on customer loyalty that will continue driving its sales. We’ll just have to wait for November 1st launch of Apple TV+ to see the impact of Apple’s new streaming subscription service.

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