Uber CEO Dara Khosrowshahi’s assertion this week that U.S.-China trade tensions were responsible for the company’s lukewarm debut last month provided only a partial explanation of the ride-share giant’s early struggles, according to a leading Wall Street analyst.
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Speaking at the Economic Club of Washington, D.C., on Wednesday, Khosrowshahi noted that Uber debuted on the same day that President Trump raised tariffs on $200 million worth of Chinese goods to 25 percent from 10 percent. As a result, Uber’s IPO coincided with international tensions that spooked the broader market and caused major exchanges to plunge.
"The timing of our IPO was very much aligned with our president’s tariff wars – the same day," Khosrowshahi said, according to USA Today. "So, I think we got caught up a bit in the market swirl. And there’s nothing you can do about it."
Uber fell 7 percent below its IPO price in its first-ever day of public trading on May 10. Company shares have hovered near $42 per share since their debut and held firm after Uber reported results that were in line with expectations in its first quarterly report.
Taken alongside Trump’s trade spat with China, the timing of Uber’s debut was “not ideal,” according to Daniel Ives, managing director of equity research at Wedbush Securities. However, he argues that the implementation of new tariffs was only responsible for 20 percent of Uber’s early stock weakness.
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“The majority of share underperformance in our opinion is related to the Street not having high conviction in the Uber story right now until they can prove monetization of the platform,” Ives said.
Wall Street analysts have expressed skepticism that Uber will be able to achieve steady profitability in the near term – a reality that Uber itself acknowledged in its S-1 SEC filing which announced its intention to go public. The ride-share company reported a loss of roughly $1 billion in the first quarter alone. While revenue jumped 20 percent to $3.1 billion for the quarter, revenue growth slowed compared to last year.
Uber is also faced with concerns about its ability to stave off tough competition from rivals such as Lyft. Despite those concerns, Wedbush Securities holds an “outperform” rating on Uber’s stock and a $65 price target over the next 12 months.
"The business itself can be quite profitable, we’re confident of that," Khosrowshahi added.