Evercore ISI analyst Mark Mahaney issued a “tactical outperform” call on Uber stock, while keeping his Outperform rating and $70 target price.
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Uber Technologies stock is trading higher Friday, after Evercore ISI analyst Mark Mahaney issued a “tactical outperform” call on the stock, while keeping his Outperform rating and $70 target price. Mahaney sees a recovery ahead in the company’s ride-sharing business—and continued strength in food delivery, even after the Covid pandemic fades away.
Mahaney sees Uber (ticker: UBER) as one of the least-risky internet stocks headed into September quarter results, given the company’s recent guidance update and lackluster stock performance for the year to date.
In recent Friday trading, Uber stock is up 2.8% to $48.62.
In a Sept. 21 filing with the Securities and Exchange Commission, Uber said it now sees gross bookings for the quarter of between $22.8 billion and $23.2 billion, narrowing the range from a previous forecast of $22 billion to $24 billion, with adjusted Ebitda, or earnings before interest, taxes, depreciation, and amortization ranging from a loss of $25 million to a profit of $25 million, with “strong improvements” from both of its primary businesses. Uber’s previous projection was simply for an Ebitda loss of under $100 million. Uber at the time also said it expects fourth-quarter adjusted Ebitda of between zero and $100 million.
Mahaney notes that despite the improved outlook, Uber stock is down about 7% year to date through Thursday, trailing a 3% gain in Lyft (LYFT), a 49% rally in DoodDash (DASH) and a 15% increase in the Nasdaq Composite. And he thinks the stock should offer investors “meaningful upside” through the end of 2021 and into 2022.
The analyst finds that the stock now trades in line with rival Lyft on a multiple of sales basis, and a sharp discount to DoorDash . He notes that while delivery had initially been considered by many investors as a counterweight to the ride-sharing business, he sees the two as complementary, as the ride-sharing market recovers, and the food delivery becomes more ingrained in the lives of consumers.
Mahaney says that the ride-sharing business has been recovering more slowly than he originally expected, but he says that once it turns around, the segment will have a much leaner cost structure after Uber chopped out $1 billion of fixed costs during the pandemic. He sees margins from the business improving in both the fourth quarter and into 2022, asserting that the June quarter was likely the peak in terms of incentives intended to lure drivers back to the platform. He says that recovery in the ride-sharing business is a question of “if, not when.”
Write to Eric J. Savitz at [email protected]
