Uber set to join S&P 500 index, reflecting how far it’s come
Uber set to join S&P 500 index, reflecting how far it’s come
On Monday, Uber will join the S&P 500 stock index. That’s a milestone for the 14-year-old ride-hailing and food delivery company, which posted its first profitable quarter this year.
Uber has grown a lot over the last few years. “This has been a massive success story coming out of the pandemic,” said Dan Ives, a technology stock analyst at Wedbush Securities.
That’s because the company’s ride-hailing business has benefited as people started traveling again and going back to the office.
Meanwhile, its food delivery business, which took off during the pandemic, has stayed strong.
“I think it just shows that many consumers have now gotten used to food delivery,” Ives said. “We’ve seen that for Uber, DoorDash and others.”
Not all of Uber’s ventures have been as successful. For instance, it also runs a freight business, and the trucking sector in general has been struggling over the last few years.
“It’s just the overall economic environment that has basically reduced the amount of freight that’s coming in and that needs to be transported,” said Ali Mogharabi, a senior equity analyst at Morningstar Research Services.
There’s also the issue of whether Uber’s drivers should be considered independent contractors or actual employees.
Mogharabi said ride-hail companies have struck deals with governments to keep classifying drivers as contractors while upping their benefits.
“In terms of some different types of protection. Funding for health care, for example. Maybe higher pay,” he said.
Uber has also been taking steps to increase its earnings, said Evan Rawley, a professor of management and entrepreneurship the University of Connecticut.
“They cut off ATG, the driverless car business that was losing a lot of money. They’re increasing fares to consumers. And they found economies of scale with their global business,” he said.
All of that has helped the company turn a profit this year.
And that makes it eligible for S&P 500 membership and more investment dollars, since many mutual funds and exchange-traded funds buy shares of whatever companies are in the index.
“Now passive funds, mutual funds and ETFs have to own shares of Uber,” Rawley said.
Uber’s membership in the index, Rawley said, reflects how far it’s come over the last 14 years.
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