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Uber is reportedly looking to sell shares between $44 to $50, aiming to raise $8 to $10 billion in the offering. This would value the company between $80 billion to $90 billion, Bloomberg reports.
Previous reports had pegged Uber’s valuation at around $120 billion. Still, that valuation is higher than its last valuation of $76 billion following a funding round.
It’s likely this decrease in valuation is influenced by Lyft’s performance on the public market. Since its debut on the NASDAQ, Lyft’s stock has suffered after skyrocketing nearly 10 percent on day one.
While Uber has yet to officially set the terms of its IPO, the company is reportedly expected to do so as early as tomorrow. Even if Uber seeks the low-end of the expected range, it would be more than three time’s the amount of Lyft’s $2.34 billion IPO. It would also make Uber’s IPO the largest one in the U.S. since Alibaba’s in 2014.
In 2018, Uber reported 2018 revenues of $11.27 billion, net income of $997 million and adjusted EBITDA losses of $1.85 billion. Uber, which filed for its IPO two weeks ago, is expected to list on the New York Stock Exchange in May.
Uber could go public at a stock price that would make it bigger than some of the best-known names in the S&P 500.
The ride-hailing company plans to list shares between $44 and $50 in its upcoming initial public offering, several news outlets reported Thursday, citing people familiar with the matter. That would value the company at as high as $90 billion when it lists on the New York Stock Exchange, according to a Bloomberg report.
The eye-popping figure would make it more valuable than S&P juggernauts like DowDuPont, General Electric and Caterpillar, according to data from Finviz.com. It would also top Morgan Stanley and BlackRock, with market capitalizations of $81 billion and $74 billion, respectively.
Market capitalization, or "market cap," is the total dollar amount of a company's outstanding shares, which can be calculated by multiplying the firm's outstanding shares by the price of one share.
Uber is different from its potential market-cap peers in a key way — it's not making money.
The San Francisco-based start-up has been mounting billion-dollar losses ahead of its market debut. Its adjusted losses totaled $1.85 billion in 2018, according to its initial IPO prospectus. Those losses slowed from 2017, when Uber lost $2.2 billion. The company increased its revenue to $11.3 billion, up 43 percent year over year.
Most tech companies are not known for making money ahead of public offerings. Lyft, which went public in April, had a loss of $911 million on $2.1 billion in revenue last year. Twitter was losing money when it listed on the New York Stock Exchange in 2013. Snap, Spotify and SurveyMonkey — which all listed in 2018 — were also bleeding money.
Lyft, Zoom and Pinterest all priced above their marketed range this year. The valuations for these tech unicorns are based on future profits, since almost none of their businesses are profitable yet.
Market valuation expert Aswath Damodaran has said the recent totals are far too high — or as he put it, "scary."
"I'm a little scared of Uber at $100 billion," the NYU Stern professor told CNBC. "I think both Lyft and Uber are struggling with a way to convert revenue growth into profits. So you are paying $100 billion for a company that still doesn't have a viable business model. That's scary."
WATCH: Uber's IPO will be five times the size of Pinterest and Zoom's IPOs combined
Tesla's (TSLA - Get Report) first-quarter earnings report didn't inspire much confidence, even amongst Tesla believers.
The electric carmaker posted a loss of $702 million for the quarter, along with revenue and earnings per share results that missed estimates by a wide margin. In the meantime, its cash position dwindled to $2.2 billion, down from $3.7 billion at the end of the previous quarter (as part of that, Tesla paid $920 billion worth of debt during the quarter.)
The disastrous results (which were also accompanied by a lengthy delay by Tesla (TSLA - Get Report) in getting the report to investors) led Wedbush analyst Dan Ives to write that he's "throwing in the white towel" on the EV maker, downgrading it from buy to neutral after standing by the stock through its various troubles because of its "transformational EV opportunity."
"To this point, in our 20 years of covering tech stocks on the Street we view this quarter as one of the top debacles we have ever seen while Musk & Co. in an episode out of the Twilight Zone act as if demand and profitability will magically return to the Tesla story," he wrote.
Ives added that the demand picture at Tesla is changing quickly, and that the carmaker has not adjusted to the evolving landscape for EVs -- including more competition on the horizon and a phase-out of tax credits for the vehicles -- with a thoughtful plan to market and distribute its cars. Earlier this year, Tesla painted an unclear sales picture going forward, announcing various price cuts and a decision -- followed by a reversal -- that it would move to online-only sales.
Another question mark for Tesla investors: Its cash balance, and how it will pay off both its debt obligations and ambitious initiatives such as a Gigafactory in China to build car batteries.
While CEO Elon Musk has insisted at several points that Tesla won't need to raise money on the grounds that it'll be profitable from here on out, he conceded that there is "some merit" to raising capital on a call with investors on Wednesday.
It looks increasingly likely that they will need to do so, according to Ives.
"At this point the writing is on the wall that Tesla will likely have to raise $3 billion+ of capital in the near term to sustain its capex and debt needs given its current profitability path, which is another black cloud over the name with an inexperienced CFO now at the helm," he added.
Shares of Tesla were trading down 4.1% to $248.03 and are down more than 25% year to date.
There's an old joke in the software engineering world, sometimes attributed to Tom Cargill of Bell Labs: "the first 90 percent of the code accounts for the first 90 percent of the development time. The remaining 10 percent of the code accounts for the other 90 percent of the development time."
On Monday, Tesla held a major event to show off the company's impressive progress toward full self-driving technology. The company demonstrated a new neural network computer that seems to be competitive with industry leader Nvidia. And Tesla explained how it leverages its vast fleet of customer-owned vehicles to collect data that helps the company train its neural networks.
Elon Musk's big message was that Tesla was close to reaching the holy grail of fully self-driving cars. Musk predicts that by the end of the year, Tesla's cars will be able to navigate both surface streets and freeways, allowing them to drive between any two points without human input.
At this point, the cars will be "feature complete," in Musk's terminology, but will still need a human driver to monitor the vehicle and intervene in the case of a malfunction. But Musk predicts it will only take about six more months for the software to become reliable enough to no longer require human supervision. By the end of 2020, Musk expects Tesla to have thousands of Tesla vehicles providing driverless rides to people in an Uber-style taxi service.In other words, Musk seems to believe that once Tesla's cars become "feature complete" later this year, they will be 90 percent of the way to full autonomy. The big question is whether that's actually true—or whether it's only true in the Cargill sense.
You can think of self-driving car development as occurring in two stages. Stage one is focused on developing a static understanding of the world. Where is the road? Where are other cars? Are there any pedestrians or bicycles nearby? What are the traffic laws in this particular area?
Once software has mastered this part of the self-driving task, it should be able to drive flawlessly between any two points on empty roads—and it should mostly be able to avoid running into things even on crowded roads. This is the level of autonomy Musk has dubbed "feature complete." Waymo achieved this level of autonomy around 2015, while Tesla is aiming to reach it later this year.
But building a car suitable for use as a driverless taxi requires a second stage of development—one focused on mastering the complex interactions with other drivers, pedestrians, and other road users. Without such mastery, a self-driving car will frequently get frozen with indecision. It will have trouble merging onto crowded freeways, navigating roundabouts, and making unprotected left turns. It might find it impossible to move forward in areas with a lot of pedestrians crossing the road, for fear one might jump in front of the car. It will have no idea what to do near construction sites or in busy parking lots.
A car like this might get you to your destination eventually, but it might be such a slow and erratic ride that no one wants to use it. And its clumsy driving style might drive other road users crazy and turn the public against self-driving technology.
In this second stage, a company also needs to handle a "long tail" of increasingly unusual situations: a car driving the wrong way on a one-way road; a truck losing traction on an icy road and slipping backward toward your vehicle; a forest fire, flood, or tornado that makes a road impassable. Some events may be rare enough that a company might test its software for years and still never see them.
Waymo has spent the last three years in the second stage of self-driving development. By contrast, Elon Musk seems to view it as trivial. He seems to believe that once Tesla's cars can recognize lane markings and other objects on the road that it will be just about ready for fully driverless operation.
Over the last decade there has been a deep-learning revolution as researchers discovered that the performance of neural networks keeps improving with a combination of deeper networks, more data, and a lot more computing power. Early deep learning experiments were conducted using the parallel processing power of consumer-grade GPUs. More recently, companies like Google and Nvidia have begun designing custom chips specifically for deep learning workloads.
Since 2016, Autopilot has been powered by Nvidia's Drive PX hardware. But last year we learned that Tesla was dumping Nvidia in favor of a custom-designed chip. Monday's event served as a coming-out party for that chip—officially known as the Full Self-Driving Computer.
Musk invited Pete Bannon, a chip designer Tesla hired away from Apple in 2016, to explain his work. Bannon said that the new system is designed to be a drop-in replacement for the previous Nvidia-based system.
"These are two independent computers that boot up and run their own operating systems," Bannon said. Each computer will have an independent source of power. If one of the computers crashes, the car will be able to continue driving.
Each self-driving chip has 6 billion transistors, Bannon said, and the system is designed to perform a handful of operations used by neural networks in a massively parallel way. Each chip has two compute engines capable of performing 9,216 multiply-add operations—the heart of neural network computations—every clock cycle. Each Full Self-Driving system will have two of these chips, resulting in a total computing capacity of 144 trillion operations per second.
Tesla says that's a 21-fold improvement over the Nvidia chips the company was using before. Of course, Nvidia has produced newer chips since 2016, but Tesla says that its chips are more powerful than even Nvidia's current Drive Xavier chip—144 TOPS compared to 21 TOPS.
But Nvidia argues that's not a fair comparison. The company says its Xavier chip delivers 30 TOPS, not 21. More importantly, Nvidia says it typically packages the Xavier on a chip with a powerful GPU chip, yielding 160 TOPS of computing power. And like Tesla, Nvidia packages these systems in pairs for redundancy, producing an overall system with 320 TOPS of computing power.
Of course, what really matters isn't the number of theoretical operations a system can perform, but how well the system performs on actual workloads. Tesla claims that its chips are specifically designed for high performance and low power consumption for self-driving applications, which could yield better performance than Nvidia's more general-purpose chips. Regardless, both companies are working on next-generation designs, so any advantage either company achieves is likely to be fleeting.
Tesla Inc.’s first-quarter earnings and accompanying call with analysts was “one of (the) top debacles we have ever seen,” according to one longtime Tesla bull, who said Thursday he was dropping his buy rating on the stock.
Daniel Ives of Wedbush cut his rating on Tesla TSLA, -3.34% to neutral from outperform, the equivalent of buy, in a scorching note that reflected equal amounts of frustration and despair.
“In our 20 years of covering tech stocks on the Street we view this quarter as one of top debacles we have ever seen while Musk & Co. in an episode out of the Twilight Zone act as if demand and profitability will magically return to the Tesla story,” Ives wrote in a note to investors. “Ultimately we believe the company’s guidance is aggressive and management/board is not taking aggressive enough cost cutting actions and shutting down future endeavors to preserve capital and give a sustained path to profitability for the Street.”
Tesla late Wednesday posted a wider-than-expected first-quarter adjusted loss and missed revenue forecasts, although Wall Street appeared to zero in initially on promises that company executives made during their call with analysts, including that the car maker would be profitable again this year.
For the full report, read: Tesla misses first-quarter earnings estimates, but Wall Street focuses on hopes of profit
Don’t miss: Elon Musk keeps moving Tesla’s finish line
Tesla posted a loss of $702 million, or $4.10 a share, in the first quarter, compared with a GAAP loss of $4.19 a share in the year-ago period. Adjusted for one-time items, Tesla said it lost $494 million, or $2.90 a share, compared with a loss of $3.35 a share a year ago.
Revenue reached $4.5 billion, compared with $3.4 billion a year ago.
Read: Wall Street analysts are mostly skeptical of Tesla’s robo-taxi plans
Analysts polled by FactSet had expected an adjusted loss of $1.15 a share on sales of $5.4 billion for the quarter. The per-share loss forecast had widened in recent days, and comes after Tesla reported third- and fourth-quarter GAAP and adjusted profits.
“In our 20 years of covering tech stocks on the Street we view this quarter as one of top debacles we have ever seen while Musk & Co. in an episode out of the Twilight Zone act as if demand and profitability will magically return to the Tesla story.”
The stock wavered between gains and losses in the extended session Wednesday, but took a dive Thursday of more than 4%.
JPMorgan analysts led by Ryan Brinkman said they expected a negative reaction, noting Tesla also missed margin and free cash flow estimates, while offering guidance that calls for another loss in the second quarter, against consensus expectations for a profit.
“Management also seemed less opposed to an equity capital raise, acknowledging ‘some merit’ to the idea, which in our view serves to highlight dilution risk that likely rises after 1Q cash flow and cash balance tracked weaker than JPM and consensus expectations,” Brinkman wrote in a note to clients.
See now: Elon Musk is just another car salesman
JPMorgan rates the stock as underweight with a price target of $200 that is 20% below its current trading level. The company is forecasting deliveries to rise 43% to 59% in the second quarter versus the first, although even at that level, it expects to be loss-making, said the analyst.
“While 2Q deliveries guidance appears potentially aggressive, the full year outlook for 360-400K implies a further roughly +35% to +45% sequential increase from 1H19 to 2H19, further highlighting the execution risk entailed in meeting the figures that are implied needed to generate positive earnings and cash flow,” said Brinkman.
See: Tesla to offer insurance in about a month, Musk says
RBC analyst Joseph Spak said the numbers were “uglier than expected” and agreed a capital raise looks likely. Spak noted that spending on research and development was the lowest since the fourth quarter of 2016.
“Elon talked about putting Tesla on a ‘spartan diet’ and while we don’t doubt the company spent inefficiently in the past, the low capex+R&D and of course the lower sales, are not hallmarks of a hypergrowth company, yet TSLA continues to be valued as one,” he wrote in a note to clients, reiterating his underperform rating on the stock and $200 price target.
Read now: Tesla to trim ‘Musk friendly’ board amid SEC fight
At Bernstein, analyst Toni Sacconaghi said the elephant in the room is still demand and questioned whether the report and call really offered any information.
“We can’t help feeling that Tesla sidestepped the issue on last night’s earnings call, with management resorting to prognostications rather than providing incremental data points,” he wrote in a note. “While we have long seen a plausible path to 400k Model 3 sales, our near-term visibility on demand / price elasticity remains limited.”
Bernstein rates the stock as market perform with a price target of $325.
Piper Jaffray took a more upbeat tone, reiterating its overweight rating on Tesla stock and guessing that the downside will be limited to the first quarter.
“Although logistical challenges—long with lower transaction prices—had an obvious impact on Q1 profitability, we think this was temporary,” analyst Alexander Potter wrote in a note. “Guidance implies a second-half recovery for both deliveries and margins, and this seems reasonable to us.
The first quarter “suffered from a particularly nasty combination of headwinds, including seasonality, a big buildup of non-US deliveries (negative for logistics costs and working capital), as well as the expiration of tax incentives in the United States,” said Potter.
Tesla made good on its pledge to improve affordability by cutting prices, thereby hurting margins. But that is a first-quarter issue that should not be repeated, he said. Piper is still with a stock price target of $396.
Analysts at Deutsche Bank said first quarter was a weak start of the year but results should improve in the coming quarters as Model 3 deliveries increase. The analysts, led by Emmanuel Rosner, did cut their price target on the stock by $10 to $280 and trimmed some estimates to account for weaker margins, they said.
Needham analysts, led by Rajvindra Gill, doubted management’s promise of a profit this year. Tesla has never generated an annual profit and it will face "deteriorating margins combined with decelerating revenue growth, pushing out profitability” further, they said.
Tesla shares have fallen about 25% in the year so far. The S&P 500 SPX, +0.06% has gained 16% in 2019, while the Dow Jones Industrial Average DJIA, -0.45% has gained 9%.
U.S. stocks retreated Thursday morning, with those for the Dow under pressure after disappointing 3M Co. earnings, while positive tech-sector earnings reports blunted losses in the Nasdaq and S&P 500.
Against the backdrop of a parade of quarterly results, investors have been weighing continued signs of sluggish growth permeating international economies.
The Dow Jones Industrial Average DJIA, -0.59% lost 250 points, or 0.9%, at 26,353, the S&P 500 index SPX, +0.01% edged 9 points, or 0.3%, lower at 2,917, while the Nasdaq Composite Index COMP, +0.24% fell 7 points, or 0.1%, at 8,095.
On Wednesday, the Dow fell 59.34 points, or 0.2%, to 26,597.05, while the S&P 500 index shed 6.43 points, or 0.2%, to 2,927.25. The Nasdaq Composite Index dropped 18.81 points, or 0.2%, to 8,102.01. During the session, the tech-heavy index set a new intraday high of 8,139.55.
See: Stock markets are ringing up records and bonds are rallying too
Guidance derived from American companies about the state of economy and the business climate has helped to underpin a mostly steady advance for equity markets so far this week, but mounting signs of economic weakness everywhere from Europe to Australia have cast a shadow over markets.
Major global exporter South Korea (paywall), was one of the most recent indicators of a pullback in expansion as the Asian country’s first-quarter gross domestic product shrank by 0.3%, marking its worst performance in more than a decade. The data come a day after a reading of consumer prices in Australia remained flat in the first quarter, increasing expectations for a rate cut from the Reserve Bank of Australia.
The spate of weakness has prompted central banks, including the Reserve Bank of Australia, the Bank of Canada and the Bank of Japan to adopt more dovish policy stances, which has, in turn, pushed the U.S. dollar to roughly two-year high, which is seen as holding the potential to buffet multinational companies at some point.
Meanwhile, a parade of earnings rolled on, with 3M Co. MMM, -11.02% notably, driving early market action after the diversified industrial giant slashed its full-year 2019 guidance and said it would cut 2,000 jobs, with a decline in shares of the company providing the stiffest headwind for the price-weighted Dow industrials. Meanwhile, Microsoft Corp. MSFT, +3.77% was offsetting some of pullback after the it reported healthy quarterly results late-Wednesday and looked close to entering the $1 trillion-dollar market-cap club for the first time.
See: Microsoft’s stock crosses trillion-dollar threshold intraday for the first time
Facebook Inc. FB, +6.22% reported revenue and profit that topped Wall Street estimates, helping drive shares of the company up 6.6%. However, the social-media giant did set aside some $3 billion for a potential regulatory fine related to its handling of client data.
Shares of Microsoft were up 3.6% Thursday, after its late-Wednesday results.
3M Co., the maker of Scotch tape and Post-it Notes, saw its shares tumble 10.2%.
Shares of Xilinix, Inc. XLNX, -16.05% fell more than 15% early Thursday, after the chip maker beat lowered expectations for fiscal fourth quarter earnings and revenue. The stock has risen 64.1% year-to-date.
Southwest Airlines Co. LUV, +3.56% edge 0.2% higher, after the air carrier reported first-quarter earnings that beat expectations, although load factor fell shy and the company raised its unit costs outlook.
Read: Why tech stocks can continue to lead the S&P 500 higher, in two charts
Shares of Altria Group Inc. MO, -5.98% retreated 4.9% after its first-quarter report.
Comcast Corp. CMCSA, +3.38% fell 2.8% Thursday morning, after the media company reported first-quarter earnings that topped estimates but fell short of revenue expectations.
Hershey Co.’s stock HSY, +5.21% rose 5% Thursday morning, after the chocolate-and-snacks company reported first-quarter earnings that exceeded Wall Street estimates for profit and revenue.
United Parcel Service Inc. UPS, -7.28% saw its shares retreat 8% Thursday after the parcel company reported quarterly results that disappointed Wall Street on earnings and revenue.
Shares of defense contractor Raytheon Co. RTN, -4.66% fell 5.8% Thursday morning, even after better-than-expected first-quarter results. The Waltham, Mass.-based company said it had net income of $781 million, or $2.77 a share, up from $633 million, or $2.19 a share, in the year-earlier period.
Tesla Inc. TSLA, -3.00% was in focus after the electric-car maker produced a wider-than-expected quarterly loss. Shares were off 1.9%.
Opinion: Elon Musk keeps moving Tesla’s finish line
Shares of Deutsche Bank AG DBK, -1.91% and Commerzbank AG CBK, -2.96% were in focus after the banking giants terminated merger talks. Shares Frankfurt-listed Deutsche Bank fell 1.3 %, while those for Commerzbank declined 2.6%.
The number of Americans who applied for first-time jobless benefits surged to 230,000 in the week ended April 20, up from 193,000 during the previous week, and above the 201,000 expected by economists polled by MarketWatch.
Orders for durable goods rose by 2.7% in March, the largest one-month increase since last summer, the Commerce Department said Thursday. Economists polled by MarketWatch had expected a 0.5% jump. When stripping out more volatile orders for aircraft and autos, orders rose 0.4%, still above the 0.3% increase forecast by economists.
A key measure of business investment, core durable orders, rose 1.3% in March, the third straight monthly increase.
National vacancy rates for rental homes remained steady at 7% in the first quarter of 2019, compared with the previous three months, while vacancy rates for homeowner housing fell 0.1%., the Commerce Department said Thursday.
The national homeownership rate of 64.2% remained steady relative to the year-ago period but fell 0.6 percentage point relative to the fourth quarter of 2018.
“It’s been a solid week for earnings, but with expectations being so low, companies that beat earnings aren’t being rewarded as much as companies that miss forecasts are getting smacked,” J.J. Kinihan, chief market strategist at TD Ameritrade told MarketWatch.
“The world’s reserve currency advanced across the board on Wednesday, with the dollar index soaring to 2-year highs, even without any U.S.-specific catalyst. Instead, the greenback capitalized on weakness in other major currencies, most notably in the euro, Aussie, kiwi, and loonie,” wrote Marios Hadjikyriacos, investment analyst at brokerage XM.com, in a Thursday research note.
The Shanghai Composite SHCOMP, -2.43% lost 2.2% and the CSI 300 Index 000300, -2.19% gave up 2.2%, while the Stoxx Europe 600 index, SXXP, -0.28% was trading 0.6% lower.
Gold prices GCM9, +0.21% edged higher while the ICE Dollar Index DXY, +0.06% fell roughly 0.1%.
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