Want to keep up to date on what’s going on in the world of investing and have perfect conversation starters?

Our new series of articles gives you just that. We answer 3 key questions about a newsworthy topic plus a useful WHAT TO SAY section so you can easily empower and share your investing know how. The best bit? All in 3 minutes of reading time.

This information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.


Why did Uber reveal its billions of losses?

Uber recently revealed its revenue and net losses for the year 2016. It was a bit of an unusual move because one of the great advantages of being a private company (not listed on a stock exchange) is keeping your financials away from prying eyes.

Some in the press have suggested Uber is trying to deflect attention away from its recent troubles including allegations of workplace harassment and its CEO being caught on video in a heated argument with an Uber driver. No matter the reason, the financial disclosures give a rare insight how this astonishingly disruptive company really operates.

How did Uber lose so much money?

Uber financial metrics

Uber is simply not charging customers enough for using Uber and sharing too much of the fare to Uber drivers. The company is effectively subsidising users of the Uber service so it can keep growing rapidly. In the last 3 months of 2016, Uber recorded a net revenue of US$2.9 billion, a very high 74% increase from the previous 3 months. Unfortunately, this came at a cost of a US$1 billion net loss.

Is Uber really worth US$69 billion?

Uber has reportedly raised money from investors at a US$69 billion valuation. Looking at the 2016 financial losses alone, Uber appears to be tremendously overvalued. It would have to increase prices by perhaps 15% or reduce the sharing of fares with Uber drivers to come close to making a profit. This is not easy to do since Uber faces stiff competition in many major markets.

What might justify Uber’s US$69 billion or even larger valuation? Imagine in 5 or 10 years’ time when your Uber car might well be self-driving. Uber would no longer have to share the fare with human drivers but instead may share a much smaller portion of the fare with autonomous car manufacturers. We wrote about this specifically in How You Can Profit from Mercedes and Uber’s Love Affair.


Did you hear Uber loss nearly US$3 billion in 2016?

No wonder the taxi industry can’t compete with them. With so much financial firepower, Uber can just keep subsidising customers to get more market share. Maybe Uber customers will be in for a price rise at some stage because I can’t see Uber investors being happy losing so much money in the long term.

Unless, they take Uber drivers completely out of the equation with self-driving cars.


Want to access more interesting investing insights and discover a smart and hassle-free way to invest globally? Join AtlasTrend for free.

Sign up to AtlasTrend for Free


About Kent Kwan

Kent Kwan is a Co-Founder of AtlasTrend, an investment platform that makes it easy for anyone to learn and invest in trends impacting our world. Kent has over 17 years experience in financial markets including as Chief Investment Officer at Arowana International Limited, and roles at JP Morgan and Macquarie.