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Uber Technologies made a groundbreaking announcement on Wednesday, revealing plans to initiate its first-ever share buyback program worth up to $7 billion.
This bold move comes from a robust resurgence in the ride-share sector and sustained growth in its food delivery business.
Record Highs Reached as Shares Surge Over 10%:
In response to this news, Uber’s shares, which soared by over 100% last year, ascended to unprecedented heights on Wednesday, experiencing a more than 10% surge.
Expressing confidence in the company’s financial trajectory, Uber CFO Prashanth Mahendra-Rajah hailed the decision, stating, “Today’s authorization of our first-ever share repurchase program is a vote of confidence in the company’s strong financial momentum.”
He further outlined plans to initially utilize the program to partially offset stock-based compensation, eventually leading to a consistent reduction in share count.
Growth Projections and Financial Targets Set for the Next Three Years:
Over the next three years, Uber anticipates robust growth in gross bookings, ranging from mid to high teens percentage, alongside adjusted core profit growth in the high 30s to 40%.
The company also aims for free cash flow as a percentage of adjusted earnings before interest, taxes, depreciation, and amortization to exceed 90% annually.
Market analysts lauded Uber’s strategic decision. Thomas Hayes, chairman of hedge fund Great Hill Capital, remarked, “Uber is hitting on all cylinders and has decided it’s time to return capital to the owners.”
He highlighted the program’s potential to reduce share count by up to 5%, a move embraced enthusiastically by shareholders.
Resurgence in Ride-Share Market and Financial Milestones:
Following a downturn amid the pandemic, the ride-share industry witnessed a remarkable resurgence as mobility increased and employees resumed office work.
Uber recently achieved a significant milestone by posting its first annual net profit since its 2019 IPO, coupled with a substantial surge in free cash flow to $3.4 billion in 2023.
Industry Dynamics and Labor Protests:
Amidst these developments, Meta Platforms’ declaration of its inaugural dividend coincided with the approach of Facebook’s 20th anniversary.
However, against the backdrop of industry success, thousands of drivers for ride-sharing giants Uber, Lyft, and food delivery app DoorDash are set to strike nationwide on Valentine’s Day, demanding fair pay.
