Uber Cuts 3,700 Full-Time Jobs, CEO Dara Khosrowshahi Waives Salary
Uber Technologies Inc. (UBER) said it will need to cut about 3,700 full-time positions, while CEO Dara Khosrowshahi will forego his base salary this year in response to the economic impact of the coronavirus pandemic.
The ride-hailing company said that it is weighing to take additional steps to lower operating expenses as it copes with the economic challenges and uncertainty resulting from the virus outbreak.
“Due to lower trip volumes in its rides segment and the company’s current hiring freeze, the company is reducing its customer support and recruiting teams,” Uber said in a SEC filing.
Uber expects to incur about $20 million in costs tied to severance and other benefits. The move comes after rival Lyft Inc. (LYFT) last week announced plans to lay off 17% of its workforce to cut costs and adjust cashflows as it struggles with significantly weakened demand for ride-sharing and transportation needs due to the coronavirus-related lockdown orders.
Webush analyst Ygal Arounian welcomed Uber’s cost-cutting move ahead of Thursday’s earnings calling it a “painful, but unfortunately a necessary move”.
“On the ride sharing front, Uber and Lyft face Herculean-like challenges looking ahead as the new reality will likely change the business models of these companies (and competitors) for the foreseeable future,” Arounian wrote in a note to investors. “With the remote theme likely becoming more commonplace across cities and countries worldwide for the next 12 to 18 months, coupled by depressed travel dynamics, the growth profiles of Uber and Lyft will look a lot different for the rest of 2020 and 2021 although valuations still look attractive for both names.”
Wedbush forecasts in its “draconian” scenario that about 30% of the gig economy revenue will disappear in the coming 1 to 2 years and a portion of it is likely to never come back. Arounian has a Buy rating on Uber stock with a $30 price target.
Overall, Wall Street analysts are upbeat on Uber stock as 26 out of 29 assign a Buy rating, and the remainder 2 have a Hold rating and 1 has a Sell rating adding up to a Strong Buy consensus rating. The $41.64 average price target projects shares will soar 49% from current levels. (See Uber’s stock analysis on TipRanks)Related News:
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