Uber stock traded at a 52-week high on Friday just after the company reported its third quarter results.
The recent victory of Proposition 22 in California has lifted Uber Technologies, Inc. (UBER) stock. The voters approved the statewide ballot initiative for redefining the employment status of gig workers in the app-based economy.
After the California voters approved to exempt gig companies from a new state labor law that would have lifted Uber’s business model. Following the voting results, Uber’s market cap reached $78 billion on Friday, crossing its previous maximum market cap of $75 billion when the company went public in May 2019.
Uber shares soared up to 6.94% to $44.87 at close on Friday. The shares surged as high as $45.38, the highest for the delivery services giant since June 2019 topping the initial public offering price of $45. The stock price was also pushed by Joe’s win in the Presidential elections, bringing a wave of optimism.
So far, the stock price is up 49% for 2020 while the S&P 500 is up 17%.
The company expects the costs to pop up by 5% following the implementation of Proposition 22, potentially increasing wages and some other benefits for drivers. The CFO of Uber, Nelson Chai during the earnings call on Thursday warned the user’s that in case if ballot initiative fails the company would transfer the costs on to consumers.
However, the yes vote on Proposition 22 will now allow the ride-hailing apps to consider its workers as contractors instead of classifying them as companies’ employees.
Wells Fargo analyst, Brian Fitzgerald addressing to investors stated:
“We consider the victory especially noteworthy because it demonstrates Uber’s leverage with government through popular opinion.”
According to Ballotpedia, the gig companies invested over $200 million in support of the proposition including, Uber, Lyft, Instacart, and DoorDash. This shows that proposition 22 was a bigger stake for all these companies.
Uber has been successful in driving the legal campaign in its favor. Reuters have highlighted that UBER has almost 9% of its business in California.
After winning over the proposition voting, the company seems optimistic about future growth. Despite mixed third quarter results, Uber has lifted its Uber Eats business in the middle of a global pandemic. The Eats progress wasa prominent aspect for the company during Q3 while ride-hailing remains weak.
In a discussion with analysts on Nov. 5, Nelson commented that Uber runs the largest food delivery system outside of China.
The CEO of the company, Dara Khosrowshahi emphasized the positive turnaround and said that the company can only benefit from what he called a “fundamental behavior shift” in consumer habits.
The analysts also support Dara’s statement and believe that Uber, being the leader inride-sharing, is in goodshape to take advantage from the rising shift in consumer behavior coming out of the crisis.