Uber's food delivery business is the company's biggest weapon against rivals like Lyft: Wedbush
- Uber published its first earnings since its IPO, beating Wall Street expectations.
- In a note to clients on Friday, Wedbush made a bull case for the company, saying its secret sauce its food delivery arm, Uber Eats.
- Wedbush said Uber Eats sets Uber apart from other ride-hailing rivals and is key to transforming it from a taxi firm into a broad consumer play.
- Wedbush also remarked on Uber's plans to ramp up the promotion of Uber by using one of the biggest weapons in its armory: its main ride-hailing app.
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Uber set pulses raising on its calamitous first day of trading on the New York Stock Exchange earlier this month, but there were few surprises in its debut quarterly earnings.
The earnings (revenue of $2.76 billion; a loss of $1 billion) were slightly above Wall Street expectations and in line with the company's prior guidance. It painted the picture of a grownup company, with losses under control and revenues rising nicely. Shares are up 1.4% in pre-market trading at the time of writing.
But it was one area of Uber's business in particular that prompted Wedbush into making a bull case for the company — and that was its food delivery arm, Uber Eats.
Uber Eats revenue rose 89% to $536 million in the first three months of 2019 compared with the same period last year, cementing its position as the largest online meal delivery player outside of China. Gross bookings also rocketed 108% to $3.1 billion — the metric CEO Dara Khosrowshahi picked out on an earnings call Thursday.
Read more: Uber's first quarterly earnings report as a public company tops Wall Street expectations
Wedbush said Uber Eats sets Uber apart from other ride-hailing rivals, such as Lyft.
"We continue to see this as Uber's biggest differentiator as it is the only one among its competitors that is a leader in both massive opportunities [ride-hailing and food delivery] on a global basis," analysts wrote in a note circulated to clients. It added that this is key to Uber's "ability to morph its ridesharing platform into a broader consumer engine."
Uber and Uber Eats cross-promotion
Wedbush was also remarked on Uber's plans to ramp up the promotion of Uber by using one of the biggest weapons in its armory: its main ride-hailing app. On the earnings call, Khosrowshahi said Uber Eats deals will be marketed more in the main app.
"Suffice it to say that we are starting to experiment in ways in which we can up-sell our ride customers to Eats deal in a way that — to be plainspoken — isn't annoying; in a way that is beneficial to our rider," he explained. It's early days, but Uber is encouraged by the results so far, the CEO added.
"What we found is that with Rides and Eats, we have got very talented tech and product team, and we are seeing early signal where essentially you can have very little if any cannibalization of a Ride and throw a significant amount of potential demand onto the Eats side," he said.
It works the other way too. Half of Uber Eats customers do no use ride-hailing, Khosrowshahi said, but are discovering it through the delivery app.
Wedbush concluded: "While it's been rocky for Uber (and its investors) since the IPO, we view last night's results and positive commentary as a much needed feather in the cap for the bulls and should help Uber start to slowly get out of the investor penalty box."
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