Investing In Uber Is The Worst Thing You Can Do With Your Money In 2019

Uber’s margins are off the charts too. But they’re off-the-charts awful. Uber loses 25 cents on every dollar it brings in. In fact, research from Recode shows Uber loses an average of $1.20 on every ride.

Uber’s problem is the fares it charges aren’t nearly enough to cover its expenses. Roughly 80% of a fare goes toward paying drivers and related expenses.

In other words, almost all its revenue is gone before it can even pay overhead costs like rent or salaries for its 16,000 employees.

Uber Will Never Make Money

Money-losing firms often aim to achieve profitability through “scale.”

This means a company keeps growing and growing and selling more and more stuff. Eventually, its revenue surpasses expenses.

This worked for Facebook. In its first few years, Facebook actually lost money. By 2009, it was selling enough ads to earn a profit.

It cost Facebook a ton of money to build out its online ad platform. But once it was up and running, it barely cost anything to sell each additional ad. As it sold more and more ads, costs stayed flat and income soared.

Uber’s business model does not afford this luxury. Very few of its costs are “fixed.” Every ride costs it money. As I said, it’s losing roughly $1.20 on every trip.

More trips won’t solve this because costs rise just as fast as revenue.

Uber is trapped in a money-losing spiral it can’t escape.

Even if Uber Succeeds, Most of Its Upside Is Long Gone

Early private investors have claimed it all.

For example, former cyclist Lance Armstrong is an early investor in Uber. He invested $100,000 around 2009 when the company was valued at less than $4 million.

Since then Uber has surged 25,000X in value! If Armstrong held on to his whole $100,000 stake, it’d be worth roughly $2.5 billion today.

As I said, you stand a chance to reap triple-digit profits or even more if you buy when a promising disruptive stock is small and 20X gains (or better) are on the table. By the way, you can check my three favorite stocks that fall into this category here.

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