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Uber makes first operating profit as driver shortage eases

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November 4, 2021

By Tina Bellon and Nivedita Balu

(Reuters) -Uber Technologies Inc on Thursday reported its first profitable quarter on an adjusted basis since it launched more than a decade ago with its two most important segments, ride-hailing and restaurant delivery, both turning the corner.

Company executives allayed investor concerns about a shortage of drivers, telling analysts that spending on incentives to entice drivers back on the road after the pandemic was largely behind the company.

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But a massive drop in the value of its stake in Chinese ridehailing company Didi drove a $2.4 billion net loss in the third quarter, and Wall Street viewed Uber’s fourth-quarter forecast as disappointing. Shares bounced in after-hours trade and were up about 1% as Uber briefed Wall Street in a call.

The California-based company reported adjusted earnings before interest, taxes, depreciation and amortization, a measure that excludes one-time costs such as stock-based compensation, of $8 million for the quarter ended Sept. 30. That compared to a loss on the same basis of $625 million a year ago.

Uber forecast an adjusted profit of $25 million to $75 million for the last quarter of 2021. Analysts on average expected $114 million, according to Refinitiv data.

Despite the adjusted profit, Uber’s earnings report came as a disappointment after smaller U.S. rival Lyft Inc on Tuesday reported its second consecutive quarterly adjusted profit at $67.3 million and said it expected adjusted EBITDA of between $70 million and $75 million in the fourth quarter.

Uber’s and Lyft’s operations have yet to become profitable on a net basis, and the companies decline to provide guidance of when that might happen.

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A drop in value of Uber’s holding in Chinese ride service Didi and stock-based compensation payments resulted in a net loss that more than doubled from last year.

Didi, which went public in June, saw its market capitalization drop by billions of dollars after China’s market regulator launched an anti-trust probe https://www.reuters.com/world/china/didi-us-debut-overshadowed-by-china-cybersecurity-probe-2021-07-05.

In Uber’s real-world business, total revenue grew 72% to $4.8 billion, above an average analyst estimate of $4.4 billion, according to IBES data from Refinitiv.

Uber’s delivery business, which includes restaurant food and store deliveries, emerged as the company’s backbone during the pandemic. Delivery revenue saw a steady increase in the third quarter, signaling that growth in riders did not come at the expense of its Uber Eats unit.

The company’s core restaurant delivery business, which makes up some 96% of delivery gross bookings, was profitable for the first time on an adjusted EBITDA basis in the third quarter, Uber said.

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Consumers were traveling in greater numbers in the third quarter and its driver and courier base had grown by nearly 640,000 people since January, Uber said. The company spent more than $250 million https://www.reuters.com/technology/uber-lyft-tout-us-ride-hail-driver-pay-incentives-amid-demand-uptick-2021-04-07 to lure drivers back after the pandemic.

Uber did not provide data on how driver numbers compared to pre-pandemic levels. Uber Chief Executive Dara Khosrowshahi said the company wanted to grow its driver base beyond 2019 levels to meet expected demand.

Ride bookings in the quarter remained more than 20% below third-quarter levels in 2019, but Uber said ride unit margins had returned to pre-pandemic levels.

“Investors want to see a meaningful recovery in the gross bookings for Uber’s ride-hailing service which is a high-margin business compared to UberEats,” said Haris Anwar, an analyst at Investing.com.

While Uber said Halloween weekend surpassed 2019, demand from riders traveling for parties and fun is at about 80% of pre-pandemic levels, executives said during an analyst earnings call.

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U.S. airport trips, among the most profitable routes in the industry, increased in recent weeks, but lagged all other ride categories, remaining around 33% below pre-pandemic levels.

(Reporting by Tina Bellon in Austin, Texas and Nivedita Balu in Bangaluru; Editing by Cynthia Osterman)

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Wood’s ARK fund fails to join broad market rally as lockdown stocks slip

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November 30, 2021

By David Randall

NEW YORK (Reuters) – The broad market relief rally on Monday left many so-called stay-at-home stocks behind, dealing another blow to Cathie Wood’s ARK Innovation fund.

The $18.6 billion ARK Innovation fund, which outperformed all other U.S.-based equity funds last year due to its outsized holdings of stocks that rallied during the economic lockdowns, dropped 0.5% in morning trading Monday, well behind the 1% gain in the S&P 500.

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The benchmark index dropped nearly 2.3% Friday on news a new coronavirus variant, now known as Omicron, had been identified in southern Africa, spurring new travel restrictions worldwide. Yet global equity markets made up some of that lost ground Monday on reports the new variant may produce mild symptoms.

Signs Omicron will not deal a severe blow to the economy are prompting investors to remain in cyclical stocks, said Phil Orlando, chief equity market strategist at Federated Hermes.

“This is not February of 2020 when the world is about to shut down. If anything we think the economy will continue to improve from here,” he said.

ARK Innovation’s declines were widespread Monday, with 8 out of the fund’s 10 largest holdings down for the day. Telemedicine company Teladoc Health Inc, the fund’s second-largest holding, fell 5.1%, while streaming company Roku Inc shed 2.6% and Zoom Video Communications Inc lost 3.2%.

For the year, ARK Innovation is down 14%, while the benchmark S&P 500 is up 23.4%. That underperformance places ARK Innovation among the worst-performing mid-cap growth funds for the year to date, according to Morningstar. It remains among the top-performing funds over the last 5 years.

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Ark did not respond to a request to comment for this story.

(Reporting by David Randall; Editing by Mark Porter)

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Oil prices rise on bets OPEC+ will hold off output hike

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November 30, 2021

By Sonali Paul

MELBOURNE (Reuters) – Oil prices climbed on Tuesday, extending a rebound from last week’s plunge on growing expectations major producers would pause plans to add crude supply in January amid uncertainty over the severity of the Omicron coronavirus variant.

U.S. West Texas Intermediate (WTI) crude futures jumped 99 cents, or 1.4%, to $70.94 a barrel at 0105 GMT, adding to a 2.6% rise on Monday.

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Brent crude futures climbed 82 cents, or 1.1%, to $74.26 a barrel, after gaining 1% on Monday.

Oil plunged around 12% on Friday along with other markets on fears the heavily mutated Omicron would spark fresh lockdowns and dent global growth.

The World Health Organization said on Monday Omicron posed a very high risk of infection surges, and several countries stepped up travel curbs. It is still unclear how severe the new variant is and whether it can resist existing vaccines.

With the demand outlook under a cloud, expectations are growing that the Organization of the Petroleum Exporting countries, Russia and their allies, together called OPEC+, due to meet on Dec. 2 will put on hold plans to add 400,000 barrels per day (bpd) of supply in January.

“We think the group will lean towards pausing output hikes in light of the Omicron variant and the oil stockpile release by major oil consumers,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

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Pressure was already growing within OPEC+ to reconsider its supply plan after last week’s release of emergency crude reserves by the United States and other major oil-consuming nations to address soaring prices.

“Following the global strategic reserve releases and the announcement of dozens of countries restricting travel to and from South Africa and neighbouring nations, OPEC and its allies can easily justify an output halt or even a slight cut in production,” OANDA analyst Edward Moya said in a note.

Also weighing on the market is the prospect of a resumption of oil exports from Iran, following upbeat comments from diplomats as talks resumed on Monday between world powers and Iran on reviving a nuclear pact.

(Reporting by Sonali Paul. Editing by Gerry Doyle)

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Main IKEA retailer’s profits jump despite ‘unprecedented challenges’

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November 30, 2021

By Anna Ringstrom

STOCKHOLM (Reuters) – Ingka Group, the owner of most IKEA stores world-wide, reported on Tuesday a jump in annual profit on the back of record demand for home furnishing as people stay at home more due to the pandemic.

Despite more temporary store closures due to pandemic related restrictions than the year before, and product shortages due to the global supply chain crisis, operating profit in the 12 months through August was up 31% at 1.9 billion euros. Sales were up 6%, to above pre-pandemic levels, with online sales jumping to account for 30% of total sales, against 18% the year before.

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Compared to the pre-pandemic fiscal 2019, profit was still down, by 8%, due to high investment levels. Capital expenditure was up 52% on the year, at 3.2 billion euros, as Ingka accelerated investments in digitalisation, new inner-city store formats, existing stores, and distribution and delivery networks.

Chief Financial Officer Juvencio Maeztu told Reuters he expected sales to grow also in the current fiscal year, and profits to be at least as high as in the past year. Investment levels would probably remain at least as high as in the past year, he said.

“Our journey to create a better IKEA forges ahead in a world that faces unprecedented challenges. COVID-19 will continue to impact our business and the communities we are a part of,” the company said in a statement.

“The global supply and transport crisis will require a resilient, flexible response. Efforts across the value chain will continue to mitigate the challenges with product availability, inflation, prices of raw materials and transport that are expected to continue into FY22.”

Budget furniture brand IKEA operates through a franchise system, with Ingka the main franchisee to brand owner Inter IKEA with 392 stores including city stores, and 73 smaller store formats.

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Inter IKEA, which is in charge of design and supply, in the past year absorbed substantially higher costs for raw materials and transports, but has flagged it will raise prices to its retailers this year in the face of continued high supply related costs.

Ingka’s Maeztu said in the interview that he could not rule out that Ingka would also raise prices this year.

(Reporting by Anna Ringstrom; editing by Richard Pullin)

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