UBER stock has been trading lower since early August on valuation concern. This week, Uber Technologies Inc (NYSE:UBER) lost its license to operate in London. Let’s analyze how this news will impact the company going forward.
A Major Setback
Over the past decade or so, Uber has expanded globally at a relentless pace and has taken over the cab business in hundreds of cities, despite opposition from local lawmakers as well as cab unions. However, after taking over the world, the Uber juggernaut has come to a halt in the British capital of London.
On Monday, the regulator Transport for London (TfL) canceled Uber’s license to operate in the city, citing a “pattern of failures” that had jeopardized the safety of the passenger. This comes as a massive blow for the company since London is a highly lucrative market.
It remains to be seen how the stock will react over the next few weeks on the back of the news. So far, however, UBER stock has lost around 40% from a 52-week high of $47.08. One of the main issues highlighted by the TfL was the fact that unregistered individuals were able to upload their photos on registered drivers’ accounts and pick up passengers.
It should be noted that Uber drivers in London had been suspended by the TfL back in 2017, but later on, the company was provided with a temporary license to operate in the British capital.
Uber’s Chief Executive Officer called the action “just wrong.” It has emerged that Uber is going to exercise its right to appeal against the decision. However, the absence of Uber from such a huge market is definitely going to see its rivals rushing in to close the supply gap. The company’s Indian rival, Ola, has already announced that it is going to enter London in the upcoming weeks. Other competitors that are going to benefit from the decision include Gett, Bolt, and Kapten.
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However, analysts believe that Uber will continue to operate in London while the appeals process continues. Additionally, analysts at Morgan Stanley and Morningstar have stated that the loss of London would not make a large dent in the company’s business, due to the sheer size of Uber’s global operations.
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