Uber touched below $39 per share in premarket trade.
If and when Uber will generate a profit is a huge question for investors. Despite the market reacting negatively to the stock, analysts at New Street research think the shares are attractively valued and has a promising path to profitability.
"Uber will eventually reach high single digit margins, as a percentage of booking, as bookings reach $200 billion," said New Street research analyst Pierre Ferragu in a note on Monday. Ferragu said Uber can reach 7% margin on bookings over time. Ferragu also said individual usage is growing. "Uber can grow monthly active users 3x in the US, 4x in the rest of the world," Ferragu said.
However, average ride per user is not growing, said Ferragu. "This conflicts with the idea that ride-sharing can continue to take share from other means of transportation, especially private cars," he said. But Ferragu said average usage will pick up as user growth slows. Ferragu also pointed out that against common wisdom, ride sharing penetration is low. With 50 million to 60 million riders in the U.S., only 30 million are active monthly users, which is only about 13% of adult urban penetration.on the heels of Uber's debut. Lyft is down almost 30% since it went public in March.
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