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Uber stock is falling after the firm confirmed that it was suspending carpool services as a result of COVID-19 despite a rally in the tech stocks.
On March 17, the shares of Uber Technologies Inc (NYSE: UBER) closed lower 6.8% to $18.91 per share. But, as the coronavirus hit the global markets, other tech stocks rebounded. In the case of Uber, the shares dropped after the firm confirmed that it was suspending carpool services as a result of COVID-19. Today the fall continues and Uber stock is now over 14% down. It is trading at $16.21.
On the other hand, Lyft Inc (NASDAQ: LYFT) has fallen today by 9.97% to $16.80 per share after suspending its carpool service. These drops happened, although there was a broader market rally experienced after the White House announced its plans to dampen the economic blow coming from the coronavirus pandemic.
The Dow Jones regained over 1,000 points on March 17 to close up 5.2% while the S&P 500 gained 6%. Amazon.com Inc (NASDAQ: AMZN) shares spiked by over 7% after the firm said that it was hiring 100,000 workers to help meet delivery demands. Netflix Inc (NASDAQ: NFLX) gained 7%, and Apple Inc (NASDAQ: AAPL) climbed 4.4%, although it said that it would close all U.S. retail stores until a later date.
All the stores located outside China remain closed until March 27. It appears like investors are considering Uber and Lyft as travel stocks considering them to be in the category of the hardest hit by the pandemic. Many health and government officials have requested the public to stay at home and avoid non-essential travel aiming to slow the spread of the virus.
As a result of the travel restrictions, Delta Air Lines Inc (NYSE: DAL) and Carnival Corporation (NYSE: CCL) share have plummeted significantly. On March 2, Uber warned in its annual financial filing that:
“A pandemic or an outbreak of disease or similar public health concern, such as the recent coronavirus outbreak, or fear of such an event could post a material risk to our business.”
Companies around the world are shifting work online or suspending their operations altogether, trying to slow travel. In the U.S., over 7,301 coronavirus cases have been confirmed and 116 deaths, as reported by John Hopkins University.
Uber (NYSE: UBER) stock had a strong start to 2020. In January, the stock posted a 22% gain, and by mid-February, the stock rose almost 40% from where it started in January. But, Uber has now lost all of its early gains as COVID-19 drives a major sell-off in stocks.
There was a major sell-off in stocks as Nasdaq Composite and S&P 500 fell by 12%. In the wake of the coronavirus stocks’ sell-off, regulatory filings show that Garrett Camp, Uber cofounder and director sold more than $13 million in Uber shares last week. Camp sold almost 500,000 shares at an average of $26 between March 10 and March 12.
Interestingly, the stock dropped by almost 30% in the last week at the same time when Camp made the sale. After that sale, Camp still owns over 20 million Uber shares.
Delivery Fee Eliminated
Uber has waived the delivery fee for the independent restaurants that use its UberEats online food ordering and delivery service. They aim to support local restaurants affected by the coronavirus pandemic. Authorities have restricted gatherings and travel striving to curb the spread of the virus. These restrictions discourage restaurant visits, which affects restaurant sales.
UberEats’ delivery fee waiver will benefit more than 100,000 restaurants across Canada and the United States. But, the delivery waiver may increase Uber’s losses since UberEats is still the company’s loss leader. Uber stock rose after the firm said that it would turn a profit in 2020. But profit promises rely on cost controls at the loss-making UberEats unit, and the waiver may compromise these efforts.