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Uber experienced a 5% surge in its shares during extended trading on Friday as it secured a spot in the S&P 500 Index, replacing Sealed Air Corp. The formal inclusion is slated to occur before the market opens on Monday, December 18, as outlined in a company press release. This development commonly triggers a rise in a company's stock price since fund managers, who mirror the S&P 500, are compelled to acquire the shares. The inclusion also necessitates that companies meet specific criteria related to valuation and profitability.
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Uber's journey on the New York Stock Exchange commenced in 2019, marked by challenges as it grappled with burning cash to retain competitive driver compensation. The company's emphasis on adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) was pivotal. While most of Uber's adjusted EBITDA is derived from mobility services, the swift profitability of its delivery business, coupled with robust advertising revenue, has significantly contributed to the company's overall profitability.
Why it matters
Uber reported a net income of $221 million on $9.29 billion in revenue in the third quarter. With an eye on long-term growth and margin improvement, Uber's CEO, Dara Khosrowshahi, outlined aspirations aligned with the success stories of industry giants like Google, Facebook, and Microsoft. As per S&P's regulations, index members must demonstrate positive earnings in the latest quarter and over the preceding four quarters, along with an adjusted market cap exceeding $14.5 billion. Uber's market cap of approximately $118 billion positions it among the S&P 500 constituents, surpassing the median market cap of $31 billion for index companies.
