Uber CEO Dara Khosrowshahi has been making substantive changes to the company since his arrival.
Uber investors hoping to strike gold with the company’s profits in the future are going to be disappointed, according to one senior executive at the company.
Profitability for the ride-hailing giant is “a few years away,” said Uber’s chief technology officer Thuan Pham during a tech conference in Hong Kong Tuesday. “We have local competitors everywhere trying to aggressively expand to grow their business, and we have to compete vigorously.”
In the U.S. alone, Lyft and Waymo are the biggest names looking to wrestle rides away from the company. Internationally, rivals like India’s Ola and China’s Didi Chuxing are competing for rides in hundreds of cities, often forcing a race to the bottom price-wise that crimps profits.
The pricing issue is less prevalent in the U.S., so Pham is more optimistic about U.S. profits, but the company overall lost more than $1 billion in 2018, and he’s not optimistic it’s going to change soon.
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He believes that due to the competition, pricing will become tighter and Uber will become more like retail giant Amazon, CNN.com reported.
“Our model is more like Amazon, where we have lots of transactions and maybe make a few pennies per transaction,” Pham said. It may not all bad if that’s the case as Amazon reported a profit of $3.6 billion during the first three months of this year.
Uber went public in May hoping to generate some cash as well as some confidence in the company, which has endured a series of very public setbacks in the previous three years. Even out of the gate, the company’s stock price stumbled, almost a direct reflection of the company’s past few years.
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However, the stock has continued to fall down into the low $37 range as investors continue to struggle to deal with negative factors that impact the company’s potential profitability. Khosrowshahi told Uber employees that the pricing could remain tough for some time.
“Sentiment does not change overnight, and I expect some tough public market times over the coming months,” he told staff in an email.
Investors seem to be grappling with three key issues when it comes to Uber, according to analysts, the U.S.-China trade negotiations, driver loyalty and, perhaps most importantly, the performance of rival Lyft.
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All three of those are factors that still impact the company. Analysts agreed at the time that while the stock falling so far out of the gate is disappointing, an investment in Uber is a long-term deal. “In the long term, it’s the right platform,” said David Williams of Williams Capital Advisers. “It’s the No. 1 in the market. Lyft is a distant second. Right now, I’d rather be in Uber than Lyft.”