The tech sector has performed well this year, with the Nasdaq Composite rising nearly 31% year-to-date. The sector continues to witness growing investor interest due to cutting-edge innovations and fast-growing tech adoption.
In this piece, I have compared popular tech names Uber Technologies, Inc. (UBER) and Riot Platforms, Inc. (RIOT) to determine the wise investment option now.
UBER missed the consensus revenue estimate in the second quarter by $0.10 billion. However, it reported an EPS of $0.18, compared to the Street estimates of a loss per share of $0.01. During the quarter, the company achieved its first GAAP operating profit, and its free cash flow was over $1 billion for the first time in a quarter.
UBER’s CEO, Dara Khosrowshahi, said, “Robust demand, new growth initiatives, and continued cost discipline resulted in an excellent quarter, with trips up 22% and a GAAP operating profit, for the first time in Uber’s history. These results also translated into strong driver and courier engagement, with 6 million drivers and couriers earning a record $15.1 billion during the quarter.”
For the third quarter, UBER forecasted its gross bookings between $34 billion and $35 billion. Its adjusted EBITDA is expected to be between $975 million and $1.025 billion.
On the other hand, RIOT missed the consensus revenue estimate by 10.2% in the second quarter. However, its EPS came 17.1% above analyst estimates. RIOT’s CEO Jason Les said, “I am excited to announce second quarter 2023 results for Riot, as this quarter showcased ongoing execution of our long-term strategy and included a number of landmark announcements solidifying our future growth path.”
During the second quarter, RIOT’s Bitcoin production rose 27% year-over-year. It produced 1,775 Bitcoin during the quarter. Its data center hosting revenue declined 22.1% year-over-year to $7.66 million.
Les said, “Riot’s core business is Bitcoin mining, and the scale of our vertically integrated operations and financial strength allowed us to execute on our power strategy at unmatched scale this quarter, driving our average cost to mine to $8,389 per Bitcoin in the second quarter, compared to an average Bitcoin price of $28,024.”
The company stated, “We anticipate companies in our industry will continue to experience challenges, and that 2023 will continue to be a period of consolidation in the Bitcoin mining industry, and, given our relative position, liquidity, and absence of long-term debt, we believe we are positioned in the competitive landscape to benefit from such consolidation.”
UBER’s stock has gained 16.3% over the past three months, while RIOT’s stock has fallen 5.2% during the same time frame. Similarly, UBER’s stock has gained 78.5% year-to-date, while RIOT has gained 209.4% in the same period.
Here are the reasons I think UBER could perform better in the near term:
Recent Financial Results
UBER’s Monthly Active Platform Consumers (MAPCs) for the second quarter ended June 30, 2023, rose 12% year-over-year to 137 million. Its gross bookings increased 16% year-over-year to $33.60 billion. The company’s revenue rose 14% over the prior-year quarter to $9.23 billion. Its adjusted EBITDA increased 152% year-over-year to $916 million.
In addition, its net cash provided by operating activities increased 171% year-over-year to $1.19 billion. Also, its net income attributable to UBER came in at $394 million, compared to a net loss attributable to UBER of $2.60 billion.
For the second quarter ended June 30, 2023, RIOT’s operating loss narrowed 90.8% year-over-year to $32.48 million. The company’s net loss narrowed 92.2% over the prior-year quarter to $27.69 million. Also, its EPS narrowed 93.7% year-over-year to $0.17.
Expected Financial Performance
Analysts expect UBER’s EPS for fiscal 2023 and 2024 to increase 106.9% and 206.2% year-over-year to $0.32 and $0.98. Its fiscal 2023 and 2024 revenues are expected to increase 9.1% and 17% year-over-year to $34.78 billion and $40.68 billion.
RIOT’s fiscal 2023 and 2024 revenues are expected to increase 31.2% and 54.5% year-over-year to $340.11 million and $525.34 million. Its EPS for fiscal 2023 and 2024 is expected to remain negative.
Profitability
UBER’s trailing-12-month revenue is 136.5 times what RIOT generates. UBER is more profitable, with an EBITDA margin and levered FCF margin of 0.83% and 2.52%, compared to RIOT’s negative 30.81% and 49.87%, respectively. Also, UBER’s gross profit margin of 32.06% compared to RIOT’s 11.55%.
Valuation
In terms of trailing-12-month Price/Book, UBER is currently trading at 10.35x, which is 580.9% higher than RIOT’s 1.52x. UBER’s forward EV/EBITDA of 24.51x is 14.9% higher than RIOT’s 21.33x. On the other hand, UBER’s forward EV/Sales of 2.49x is 48.9% lower than RIOT’s 4.87x.
POWR Ratings
UBER has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, RIOT has an overall rating of F, translating to a Strong Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. UBER has an A grade for Sentiment, consistent with its favorable analyst estimates. On the other hand, RIOT’s unfavorable analyst estimates justify its D grade for Sentiment.
UBER’s B grade for Quality is in sync with its high profitability. On the other hand, RIOT’s D grade for Quality is consistent with its poor profitability.
Of the 76 stocks in the Technology - Services industry, UBER is ranked #22, while RIOT is ranked #74 in the same industry.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Value, Momentum, and Stability. Click here to view UBER’s ratings. Get all the ratings of RIOT here.
The Winner
Despite missing revenue estimates during the second quarter, UBER reported an operating profit for the first time in its history and over $1 billion in free cash flow. The company has also provided an optimistic growth outlook for the third quarter.
On the other hand, bitcoin miner RIOT reported mixed earnings during the second quarter. RIOT’s shares have risen strongly this year thanks to the recovery in Bitcoin prices. However, the company admitted that its industry will likely continue experiencing challenges through 2023.
Given RIOT's headwinds, UBER could be a better investor choice now.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Technology - Services industry here.
What To Do Next?
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
UBER shares were trading at $44.98 per share on Tuesday morning, up $0.83 (+1.88%). Year-to-date, UBER has gained 81.88%, versus a 17.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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