I'm trying to understand something that seems highly counter-intuitive. For-profit companies exist to turn a profit. I know that a company might run negative early on, but people who believe in their business model (i.e. venture capital) will often step in with money for a piece of the future pie. But at some point a company has to be able to turn a profit to survive. Yet, there are some companies that have never turned a profit, and seem unlikely to do so, and yet they seem to be relatively well valued.
Uber’s revenue in the fourth quarter of 2019 grew 37% to $4.07 billion. However, it reported a net loss of -$1.1 billion compared to a net loss of -$887 million in the same period last year. EPS was negative -$0.49 compared to -$0.52 expected.
Full-year 2019 revenue grew 26% to $14.1 billion and net loss was -$8.5 billion compared to a net profit of $997 million for 2018. Stock-based compensation was $4.6 billion in 2019 for a net loss of $4.1 billion and adjusted EBITDA of negative -$2.73 billion.
In 2017, Uber posted similar losses at $4 billion.
There's also some open questions about how their business model works
Or consider Uber. The application is supposed to reduce drivers’ downtime by efficiently matching riders to drivers. In places where you would ordinarily have to phone for a taxi, the app technology probably does provide real, large advantages. In practice, there are a lot of places where technological matching is less efficient than in-person matching, especially airports, where inefficient Uber pickup has led to increasingly clogged access roads as drivers search for specific passengers instead of picking up whoever they see at the front of the line. Unfortunately, these places where the app is at a disadvantage compared to traditional taxi hails tend to be the places where demand for transportation services is highest: A key driver of Manhattan’s increased traffic congestion over the last decade is passenger-less Uber drivers, moving around looking for fares. And if Uber’s technology is so good at matching drivers and riders and capturing the variation in customers’ willingness to pay across time, why has the company had to repeatedly resort to paying drivers more than it collects from customers in order to ensure that enough of them are around at peak times?
I feel like I'm missing something here. Why would people clamor to invest in a company with no profits?