Matein Khalid
I had recommended a strategic buy on Airbnb (ABNB) at 137 in July after a 20-point hit as I saw multiple catalysts for a bull run (https://lnkd.in/gEfT4Bwy). Since ABNB opened at 176 on Nasdaq today, I have now decided that I have to milk this cow via leveraged longs/put sales/out of the money calls to an obscene scale and the risk/reward calculus on high valuation shares is now iffy since Fed’s taper timeline has ignited a sharp spike in the 10 Year US Treasury note yields to 1.48.
I also began accumulating UBER at 36 to 38 and I am still a nervous long at $46 as higher gasoline/bond yields is not exactly short term bullish for the global ride hailing icon. Yet I absolutely will not slash my exposure on UBER to zero. Why?
1) Dara’s updated guidance on fiscal Q3 EBITDA from a loss of $25 million to a profit of $25million is, as the English say “jolly good news duckies.
2) The biggest drag on Uber and the reason I had recommended investors in the Gulf short this puppy at its IPO was the prospect of protracted losses. Now the management projects an imminent Q4 positive EBITDA and this is a game changer for investor psychology on UBER.
3) The shortage of drivers and antipathy from governments and unions as varied as Brazil/France and the losses on its 14% stake in China’s Didi will not suddenly transform this beast into a fairytale beauty but a revaluation is now my base case scenario.
4) Uber eats and the new grocery delivery/last mile logistics businesses have huge, embedded optionality that is a lot more credible when the bottom line is EBITDA positive as it surely will in 2022.
5) The Travis management team has totally impressed me with its execution on $1 billion in operating cost cuts in fiscal 2020, thus making the ride sharing business a cash flow tsunami Wall Street cannot possibly ignore.
While the oracles of Delphi will have the last word (note the oracle of Larry has risen 30% above my recommended buy price of $64 ORCL) on Uber, as on everything else that happens in the known universe, I would use any Fed taper tantrum on Nasdaq to accumulate UBER, ideally in the early 40’s via option strategies.
Matein Khalid is Chief Investment Officer at Asas Capital
