Friday morning brought relative calm to the investment world, with the flood of earnings reports finally starting to slow down after a busy week on Wall Street. Favorable readings on gross domestic product for the first quarter lifted spirits somewhat, but after gains that sent several major benchmarks to record highs earlier this week, investors seemed content to coast into the weekend. Just after 11:30 a.m. EDT, the Dow Jones Industrial Average (DJINDICES:^DJI) was up 30 points to 26,492. The S&P 500 (SNPINDEX:^GSPC) added 5 points to 2,931, but the Nasdaq Composite (NASDAQINDEX:^IXIC) was off 5 points to 8,114.
A lot of news this morning related to automobiles and mobility, and as a transformation in transportation gains momentum, companies are trying to position themselves for success. Uber revealed that it intends to go public at a valuation that’s considerably less than what many analysts had expected, but automaker Ford Motor (NYSE:F) issued a financial report that showed how the company has stepped on the gas to start 2019.
Image source: Uber.
Uber disappoints with downbeat IPO expectations
Uber doesn’t yet trade publicly, with an initial public offering of shares planned in coming months. Yet the taxi alternative set a disappointingly low price target for its IPO, and in the process also revealed just how much money the company is losing.
Uber set its initial price range at $44 to $50 per share for its initial public offering. With the intent of offering 180 million shares issued directly as well as 27 million shares owned by current shareholders, Uber could end up selling more than $10 billion in stock if the offering gets priced at the high end of its projected range.
With an implied valuation of somewhere between $80 billion and $90 billion, Uber seems to be coming out well ahead of rival Lyft (NASDAQ:LYFT), which has struggled out of the gate and has a market cap of just $16 billion or so. Yet some had hoped that Uber would have its IPO at a valuation closer to $120 billion, signaling that Lyft’s disappointing debut has poisoned the well for companies across the ridesharing space.
More troubling is the fact that Uber reported a loss of about $1 billion on revenue of $3 billion during the first quarter of 2019. Given how much negative publicity Lyft got for losing less than that over the course of an entire year, it’ll take a lot of confidence from IPO participants for Uber to convince them that its long-term strategy is worth the price investors will have to pay for the stock.
Ford drives higher
Meanwhile, elsewhere in the auto world, shares of Ford Motor surged higher by 11%. The F-150 maker reported first-quarter financial results that restored confidence in the long-struggling stock, and the company believes it’s building momentum that should help carry it forward throughout 2019 and beyond.
At first glance, Ford’s numbers didn’t look all that great. Revenue and net income fell from year-ago levels based on ordinary accounting rules, with the automaker saying that lower volume driven by a decline in the overall condition of the global auto industry played a key role in the drops. Yet much of the pressure on the bottom line came from restructuring charges and other special items designed to help Ford implement strategic initiatives to foster long-term growth.
Looking forward, though, Ford is increasingly optimistic. The automaker believes that revenue, adjusted pre-tax profit margin, and return on invested capital should all improve in 2019 compared to 2018 levels. Moreover, even though earnings could see further downward pressure ahead, much of that will be due to the cost of launching new models as well as implementing internal improvements. That’s all good news for shareholders who’ve seen their stock steadily lose value since 2014 — even if Ford still has a long way to go before it can claim a full recovery.