The selling pressures of the past two weeks continued last week as traders grappled with tariff concerns, a possibly slowing economy, and growth stocks again falling dramatically. By week’s end the S&P 500 had lost 3.1%, the Dow had fallen 2.4%, and the Nasdaq had dropped another 3.5%. The selling only worsened on Monday, with all three indexes down more than 2%.
The Stock – Uber (UBER)
Uber took some hits in the market for a disappointing fourth quarter, but investors probably were too negative given the effect of one-time events like the California wildfires, big snowstorms and foreign exchange. Looking at the business itself, not external factors, Uber is still doing extremely well.
The ride sharing provider remains the world’s biggest car service and it’s seeing excellent penetration with its Delivery segment (Eats, its food delivery service), and a new service emphasizing rides for teenagers. Plus, membership in Uber One, its $10 a month subscription that offers discounts and priority booking to members, is up 50% in the past 12 months off an already large base. Partnerships with large employers have helped boost Uber One member numbers, who spend on average three times as much as casual Uber users.
The company is now working with automakers to plan out autonomous vehicle (AV) fleets to its preferred specifications. AV is an early-stage business but has been a focus for the company and investors, with competition from Tesla (Robotaxi) potentially undercutting Uber’s business in the distant future, though much of that panic has died down thanks to the firm’s own moves; self-driving vehicles aren’t allowed in most markets yet, but Uber has new launches in partnership with Waymo coming in Atlanta and Austin. Management believes as more markets open to AVs, it can scale it up to multi-billion-dollar sales in a few years, as it has done with premium services like Uber Reserve (scheduling rides in advance).
Over the next three years, Uber expects to grow bookings by the mid-teens annually, a nice growth rate considering it already gathers large bookings now – Uber says this quarter should bring gross bookings around $43 billion. For 2025, Wall Street sees revenue rising nearly 15% to $50.4 billion with net income per share of $2.50, which would be down sharply from 2024, but that was a blowout year for profit due to a huge boost from revaluation of Uber’s equity investments. It compares very well to 2023, which had $0.83 EPS on normal, core business. The fact that hedge fund manager Bill Ackman revealed a position in Uber last month has also helped perception.
Technical Analysis
UBER was a leader in the market’s November 2023 to February 2024 rally, but after stalling out for a few weeks, shares cascaded 33% into August and, after rebounding back above its prior high, slipped sharply again (by 32% this time). But this time, UBER has rounded out a very nice-looking launching pad, with a big-volume buying clue after the Ackman news in early February, and with a reasonable pullback of late while the market has cascaded. Stop – 66
The Covered Call Trade
Buy Uber (UBER) Stock at 72.5, Sell to Open April 70 Strike Calls (exp. 4/17) for $5.50, or a Net Price of 67 or less
Static Return: $300 per covered call (4.47%)
Breakeven: 67
Covered Call Return (if assigned): $300 per covered call (4.47%)
Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.
However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 67 or less. (In this case 72.5 minus 5.50 = 67. Or another example is you could pay 73 for the stock and sell the call for 6, which also equals 67)
For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …
Open Positions
| Stock Name and Symbol | Price Bought | Current Stock Price | Stop | Option - Price of Call Sold | Current Option Price |
| Royalty Pharma (RPRX) | 34 | 33 | 29 | April 35 -- $0.75 | $0.75 |
| Exelixis (EXEL) | 38.25 | 38 | 32.5 | April 39 -- $2.20 | $1.75 |
The next Cabot Profit Booster issue will be published on March 18, 2025.
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