[By Bill Alpert] The stock of Uber Technologies has been cut in half by the coronavirus pandemic. The shares (ticker: UBER) were down another 10% Monday morning, to $20.32. But the company will make it through the viral stress test, says Pierre Ferragu, in a note by New Street Research. Ridership will be hurt as folks stay home, Ferragu acknowledges, but the Uber Eats food delivery service could benefit and the company’s asset-light business model should allow it to adjust costs and still reach its goal of achieving break-even cash flow by the end of 2020. “We expect Eats to thrive, both in terms of volumes and profitability,” writes the analyst, “as food delivery captures restaurant frequentations.” In locked-down cities like Hong Kong and Seattle, ride-hailing services like Uber and Lyft (LYFT) have suffered a drop in bookings of 40% or more, says Ferragu. He thinks the worst case for Uber will be a 30% hit to its earnings before interest, taxes, depreciation, and amortization, or Ebitda, in the next two quarters. That would pull his prior estimate for $600 million in negative Ebitda, for the combined quarters, down to negative $1.8 billion. With $9.5 billion cash on hand, by his estimate, Uber can easily cope with the coronavirus hit. The company’s cost base is highly variable—it can reduce marketing costs and driver incentive payments. Its modest capital spending goes mostly toward office space. Free cash flow, after capital spending, was negative $4.9 billion in 2019. Ferragu was estimating negative $2.8 billion for 2020. Higher volumes and profits in food deliveries could offset the ridership hit, as people order out. When the coronavirus recession passes, New Street expects the rise in ride hailing and food delivery to resume.


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