Poor economic data and the fallout of a driver strike weighed down the stock.
Today, Uber shares fell along with a wider market sell-off as stronger-than-expected economic data triggered expectations that the Federal Reserve will increase rates aggressively next year.
Due to Uber’s role as a transportation company, its business is closely tied to the global economy. This week, New York City drivers walked out on strike, causing the company to deal with its labour issues.
Uber stock was down 3.8% at 11:27 a.m. ET, while the Nasdaq was down 2.6%.
How Did It Crash?
Despite the Federal Reserve’s efforts to cool the economy, economic growth last quarter was solid, as the final estimate for third-quarter GDP came in at 3.2%, above estimates at 2.9%.
Additionally, unemployment claims remained low last week, a sign the labour market remains tight. Fed Chair Jerome Powell has previously warned that rising rates may adversely affect the labour market. Some economists believe unemployment will have to rise to achieve the Fed’s 2% inflation target.
Uber’s services would be affected by a deep recession if positive economic data were to boost expectations for more aggressive monetary policy from the Fed.
Meanwhile, Uber is also sensitive to labour market fluctuations, as demonstrated by the recent strike in New York.
A pay increase for Uber and Lyft drivers was approved by the Taxi and Limousine Commission in New York, which Uber sued. According to them, it would cost an additional $21 million to $23 million a month and increase fares.
Some Uber drivers went on strike on Monday after a judge ordered an injunction against raises.
Does The Insurance cover it?
On an adjusted EBITDA basis, Uber is profitable. Uber has taken some steps toward profitability. Its price has dropped more than 50% from its IPO price in 2022, which suggests investors are still skeptical of the stock.
As the company continues to grapple with regulatory headaches and the prospect of a global recession next year, other challenges remain. It doesn’t have a chance in a tight labour market.
Even though the New York strike won’t have a material effect, it is still worth keeping an eye on these issues. This is because Uber’s strategy to increase profitability has been to rein in driver and rider incentives.