Uber investors may shrug off $5 billion loss

Even by the standards of Uber Technologies, $5 billion is a lot to lose in three months of doing business. Yet, that’s the amount analysts expect to see for the second quarter.

An average of analyst estimates compiled by Bloomberg shows an anticipated net loss of $5.27 billion. Most of that total, about $3.5 billion, is expected to stem from stock-based compensation tied to the initial public offering, according to Bloomberg Intelligence. It’s a routine cost for newly public companies—though Uber’s is much larger due to the company’s size—and investors are likely to forgive it as a one-off.

The challenge for Uber is to show that it is, indeed, an anomaly and not a symbol of a larger problem. The company will get that chance when it releases quarterly financial information Thursday afternoon.

Investors will probably pay close attention to adjusted losses, which exclude interest, taxes, the one-time compensation costs and other expenses. Even by that measure, analysts expect the second-quarter loss to widen by 74%, to $979 million.

If Lyft’s recent performance is any indication, the ride-hailing business is showing signs investors want to see. Lyft, the main alternative to Uber in North America, reported Wednesday a quarterly loss and sales that were better than expected while boosting its forecast.

But Lyft and Uber remain in the red. The impending $5 billion net loss for Uber underlines just how far the business is from turning a profit.

Analysts estimate that the second-quarter loss will account for more than half of the $8.3 billion Uber is expected to lose this year. That’s twice as much as the loss in 2017. Last year, the company generated $997 million in net income, thanks largely to the sale of its Southeast Asia business.

But the loss isn’t expected to spark a selloff in the stock, said Tom White, an analyst at D.A. Davidson. Wall Street remains optimistic, with 23 analysts giving Uber a buy rating. Eleven lists the stock as a hold, and just one says sell, according to data compiled by Bloomberg.

At some point, Uber is expected to spend another $2.5 billion on stock compensation, said Mandeep Singh, a senior analyst for Bloomberg Intelligence.

Investors are focused on much wonkier measures of Uber’s economics. They’re trying to assess the health of the ride-hailing business and food delivery.