Stock market cap has nothing to do with the profitability of the business, all it need is some stock trading at X price multiply by X number of shares, the case of Uber they based on last capital raising price.
Here are some take on Uber
Uber is trendy no doubt, it is a new fashion, it bring excitement to the sectors but the true test of the business is how it going to generate profit? this will ensure its survival, fashion comes and goes and it is like a hot body but you need oxygen to keep
it going and it is the cash flow, right now Uber burns hundred of million a year and the current trend is the
bigger they go they more money they lose, that usually tell you the business model is flaw, it cant generate enough cash flow to sustain the business without external capital funding, this can not go on forever, no one can fund a business losing hundred of million a year, it eventually will need to generate profit or funder turn off the tap and not throwing any more good money after bad.
the way Uber works I can not see it will generate a profit if they playing on the even playing field, Uber works by rely on their drivers works for next to nothing, and the bigger they go the more cheaper driver they need and that their flaw.
early drivers get incentives and all sort of stuff to make it worth wise and the word spreads but lately those incentive stops
and more driver jump into the pool and competing with the earlier driver and Uber want to lower price all the time for their
drivers in order to generate volume and revenue to keep funder happy that they have growing volume and revenue
but that put them at odd with their drivers and many of them are not not very happy.
after cost of running their car, get a proper business for it and pay tax these driver pretty much works for free, how long can this last? On their way to greatness they offer incentives to get more drivers, it works against them on the down side, lower price, more and more driver aren't making money more and more drivers quit.
Basically Uber rely on a pool of every growing cheap drivers that make little money to make their model works
after a year or two these driver will figure it out sheet they aren't making money, insurance, maintenance, tax and they will quit.
and not to mention regulatory hurdle they face and among many many things.
Nothing is certain and I been around and I see this sort of thing before, Uber has been playing trickery with their backers
they know they cant generate profit so the only way they can sustain it is by expanding and hide their flaws, by expanding they claim they generate millions more revenue, capture more market and they need more money and profit driver is not an issue
we are in expansion phase ... true dot com style ...
same thing I see with SGH at least these guys make some money but their cash flow is weak so they hide that by again roll up and expand and the market love this sort of stuff until it comes undone.
Good luck folks, have conviction and understand what you buying and the business model and you can sleep well at night and make a lot of money in the process.
CAB business is sound, it get some revenue hit due to 5% reduction, it weak share price is purely on sentiment and that too shall pass and once the hurdle is passed and Uber gone belly up ...watch out
CAB Price at posting:
$3.31 Sentiment: Buy Disclosure: Held
