Uber is finally going public on Friday. Are they going to hit a $90 billion valuation target?
Is Uber Going to Hit the Targeted $90 Billion in an Initial Public Offering?
Uber, a worldwide cab service company, is finally going public on Friday. This event is eagerly anticipated because this is going to be one of the highest initial public offerings in American history.
While some of the previous assessments predicted that this company’s value would soar up to $120 billion, Uber is actually aiming at $80–90 billion. Although this estimate is amazing, you have to bear in mind that Uber has never been profitable since they’ve been burning through their income at an astonishing rate.
For over a decade of their existence, they have built such a recognizable brand that now people are using their name to promote other services, for example, “Uber, but for catering.” At the same time, they have invested a lot of money on expanding their services. For example, if you’re looking for a shipping company, you can use Uber Freight; if you need a food delivery service, you can rely on Uber Eats; there is even Uber Jump for scooters and electric bikes.
But Uber’s ambition to cover different fronts and offer as many services as they can cost them a lot of money that wasn’t compensated for in other ways. Uber still holds their tariffs low to keep leverage over the competition.
So, the burning question is how can they make a balance between investing in branching out and making some profit at the same time?
For now, Uber stays the leading company in the ride-hailing business, and they can only wait for the healthy competition to appear on the market. When this happens, they will probably drop their current policy of giving away coupons and discounts which will bring the long-awaited profit.
Ygal Arounian, an equity analyst, predicts a bright future for Uber. In his opinion, it is always a good thing to offer a wide range of services. In this way, Uber drivers can shift from one service to another and beat the competition. For example, they can provide ride-hailing services during the morning rush hour when everyone goes to work, then switch to food delivery during lunchtime; after that, they can return to ride-hailing until dinner time, etc. In other words, they can alternate between services.
If they manage to cut expenses, work out how to spend less on insurance, and start using self-driving cars, this prominent company will start making profit in no time. This is a great recipe for success, but what challenges could there be along the way?
Those who doubt this plan would say that Uber would have to eliminate the vast competition first. Besides, they would have to overcome different obstacles, like tackle technical requirements and an intricate web of regulations, to start using cars without drivers. These are only some of the challenges Uber will face in the future. Unfortunatelly, they have some pressing issues to worry about right now.
Uber drivers across America have gone on strike demanding higher salaries. For example, per-mile pay in L.A. went down by 25%. Disgruntled workers also demand to switch from contractors to employees, which means that Uber has to spend more money on them.
There is an issue of blemished reputation too. Not only has the company disregarded the law, but its culture has also been perceived as toxic. They made some changes in the management in an attempt to clear their name, so they are facing the IPO with a somewhat improved company image