Uber Shares Surge as Company Joins S&P 500 Index
Uber, the popular ride-hailing and food delivery company, experienced a 5% surge in its shares during extended trading after being added to the S&P 500 Index. This move comes as Sealed Air Corp is replaced, and the change is set to take place on Monday, December 18th.
The inclusion of Uber in the prestigious index has historically led to an increase in stock prices for companies. This is because fund managers are required to acquire shares of the newly added company to align their portfolios with the index. As a result, Uber’s entry into the S&P 500 is anticipated to further boost its market performance.
Since its debut on the New York Stock Exchange in 2019, Uber has faced several challenges, including concerns over driver payments and low profit margins. However, the company has been actively working towards financial growth and sustainability. One key metric that has been closely monitored is Uber’s adjusted earnings before interest, tax, depreciation, and amortization (EBITDA), which has been a preferred measure of profitability.
One significant factor contributing to Uber’s improved profitability is its delivery business. The company’s delivery arm has become profitable at a faster rate than expected, bolstering overall financial performance. Moreover, Uber has made efforts to enhance its cost structure, including a significant workforce reduction of over 3,500 jobs in 2020.
In the third quarter of this year, Uber reported a net income of $221 million on $9.29 billion in revenue. CEO Dara Khosrowshahi has been focused on building a resilient company that can steadily improve its margins and expand its top-line rates.
The rules set by S&P state that index members must have positive earnings in the most recent quarter and an adjusted market capitalization of at least $14.5 billion. With Uber’s market capitalization currently at approximately $118 billion, well above the required threshold, it is a testament to the company’s growth and success.
Compared to the median market capitalization of S&P 500 companies, which stands just over $31 billion, Uber’s inclusion demonstrates its robust presence and substantial valuation in the market.
The addition of Uber to the S&P 500 Index not only marks an important milestone for the company but also highlights its ongoing efforts to strengthen its position in the industry. As Uber continues to navigate and adapt to changing market dynamics, its inclusion in the prestigious index is a testament to its resilience and long-term potential.
