Shares in ride-hailing company Uber lost another 10 per cent on Monday, dipping below $37 US per share only days after the company went public at $45 US per share.
Monday was the first full day of trading for the ride-hailing company after its rocky debut on the stock market Friday. Its shares had been priced at $45 each, but closed at $41,57, down about seven per cent.
Companies like to see their stock prices rise after they begin trading, because it validates the excitement and interest around the company. A stock that falls from its IPO can become a self-fulfilling prophecy.
Over the last five years, only about 10 per cent of similar technology IPOs finished their first day in negative territory, said Matt Kennedy, senior IPO market strategist at Renaissance Capital, a manager of IPO-focused funds.
Uber’s rival Lyft saw its shares soar on their first day of trading in March, before the value of the company began to sink. Uber was hoping to launch higher and stay up, but so far that’s not happening.
The concern with both companies seems to be profitability. While both are growing quickly, neither company turns a profit and they both face a bumpy road to ever do so.
Despite the company’s shares being shifted into reverse, analysts who cover Uber are optimistic about its prospects. Out of five polled by Bloomberg, three rate the company a buy, and the other two are neutral.
“In the last couple of weeks we have noticed investors questioning more about how good of a business model is ride-sharing really,” said D.A. Davidson, an analyst with Tom White, who has a neutral rating on the shares.
Wedbush analyst Ygal Arounian, who has a buy rating on the company, said investors need to be patient as the company grows Uber Eats, Uber Freight and autonomous driving initiatives beyond its core service of hooking up drivers with passengers willing to pay.
“While it will take time for the stock to settle and Uber must execute flawlessly over the coming 12 to 18 months, we believe a $100 billion plus market cap is warranted,” Arounian said.