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As Uber shares hit new lows, analysts see no road to profits

Uber’s stock sank to a record low Wednesday, as early investors and employees took advantage of the first opportunity they had to unload the stock since the ride-hailing giant’s disastrous IPO six months ago. 

Uber’s (UBER) post-IPO lockup period made about 90% of Uber’s stock available for sale, but don’t expect the avalanche of selling to happen all in one day, according to Oliver Pursche, chief market strategist at Bruderman Brothers Asset Management.

“If you look at how stocks have behaved immediately after their lockup period, they’re typically down 1%-2% the day the lockup expires and then drop double-digits the next 30 days. “There’s a lot of people who say I don’t want to be part of that first wave of selling,” Pursche said on Yahoo Finance’s The First Trade.

Underwater investment

Another reason investors may want to hold onto their Uber stock a little longer is that they’re underwater. According to Uber’s prospectus, about 545 million shares purchased before the IPO are currently in the red, meaning they’re below the price investors initially paid for them. 

Uber’s stock sank 10% Tuesday after the company revealed it lost over a billion dollars in its third quarter. However, this time, CEO Dara Khosrowshahi offered weary investors a timeline for turning a profit, targeting “total company EBITDA profitability for the full year 2021.”

Uber CEO Dara Khosrowshahi arrives at the New York Stock Exchange as his company makes its initial public offering, Friday, May 10, 2019. (AP Photo/Richard Drew)

“It’s the classic negative reaction to good news, and that’s never good,” said Matt Maley, chief market strategist at Miller Tabak.

“Where is the profitability going to come from?” Maley asked. “CEOs tend to see things through rose-colored glasses. The stock is breaking to new lows. I want my money in areas that have a lot more upside potential.”

Analysts say it will be very telling to see if large corporate investors dump the stock now that they are free to push the sell button.

Softbank, the biggest buyer of pre-IPO shares, revealed that it lost $6.5 billion from bad bets on Uber and WeWork. PayPal (PYPL) announced in October a $228 million loss on investments before taxes in the third quarter, thanks in large part to its investment in Uber just prior to the company going public.

Uber is no Facebook

“When Facebook’s (FB) lockup period happened, the company had much better prospects for profitability than Uber,” said Maley. “Right now, it doesn’t seem like Uber or Lyft (LYFT) has that same kind of potential despite what the CEO is talking about.”

“I’m not saying you should dump all your Uber stock,” said Maley. “I’m just saying there are other areas of the market where you can make profits.”

Alexis Christoforous is co-anchor of Yahoo Finance’s “The First Trade.” Follow her on Twitter @AlexisTVNews.

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