Uber Technologies, Inc. (NYSE:UBER) has been one of the biggest disappointments of the year when it has come to IPOs. While there was a lot of hype and fanfare surrounding the stock, it has gone on to fall around 30% in the past three months.
However, with a mammoth loss of $5.2 billion in its last quarter, it didn’t take long for investors to begin second-guessing the stock.
And things could get a lot worse for the company, especially if its drivers end up having to be treated as employees rather than contractors. That would saddle the company with even more costs and liabilities that could make its financial model even more problematic.
It’s still a big question mark at this point what will happen, but that’s just been one of the bigger factors that have been weighing on investors as of late.
However, the biggest problem is that the stock is still at a very hefty valuation of $50 billion and it doesn’t have a very defensible competitive advantage. A new competitor with some strong financial backing could put a big dent in the company’s market share and growth potential, and there’s little that Uber could do about it.
While it’s not something that may be on the horizon today, it’s a reminder that a company with these kinds of risks is simply not worth this kind of valuation.
There’s a lot of uncertainty surrounding Uber’s stock today and while investors may be tempted into buying the stock at its current price, the decline may not be over just yet.
