Thursday, Mar 19th 2020

How Uber is surprisingly immune to coronavirus


After a sharp technical unwind on Wednesday, Uber rallied over +38% on Thursday after demonstrating on an investor call the resilience of its business model to coronavirus-driven slowdowns.

The 4 key takeaways:

1.) They have few near-term debt obligations.

Uber has raised debt on relatively lax terms with no maturities until 2023.

2.) Even with an 80% slowdown, their Rides business can break even.

What’s not very well-appreciated is that two-thirds of Uber’s cost structure is variable.

As a result, the Rides business can likely withstand an 80% drawdown in bookings and still break even on an EBITDA basis.

3.) Uber Eats is seeing a massive uptick in restaurant signups.

Eats is seeing a 10x increase in restaurant signups since just last week, potentially helping offset some of the decline seen in Rides.

And most importantly…

4.) They have plenty of liquidity, including $10 billion in unrestricted cash.

Management believes that Uber can withstand even the most dramatic, “extreme edge case” scenario (assuming an 80% decline in rides and no recovery).

In that environment, it would still end the year with $4 billion in cash plus a fully untapped $2 billion credit line, placing it in a superb financial position.

As of this writing, UBER was a portfolio holding of Titan. This security may cease to be a portfolio holding at some point in the future.
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