Uber: A Standout Recovery Play

Gig-work companies came under pressure last week, after U.S. Labor Secretary Marty Walsh opined that gig workers should be given employee status.

As a result, shares of Uber (UBER) and some of its fellow gig economy brethren took a dive. Investors obviously feared the implications for companies heavily reliant on independent contractors. Should Walsh’ suggestion become a reality, costs could ramp up as expenses such as paid sick leave, health insurance and payroll taxes get added to the books.

As far as Uber is concerned, however, Wedbush’s Daniel Ives thinks the reaction is overblown.

“Based on our discussions with experts on labor law issues it appears federal involvement in this issue would be very complex and highly unlikely without legislation changes, which at minimum would take significant time to play out,” the 5-star analyst said. “Uber (and Lyft) have been proactive about pushing the California model on a national basis, and we ultimately see that middle ground approach as one that ultimately prevails nationally over the coming years.”

The “California model” Ives is referring to is Proposition 22, the hard-won initiative which passed in the Golden State toward the end of last year and lets the ride-hailing businesses keep their drivers under the definition of independent contractors, albeit with some benefits.Therefore, Ives said, the Labor Secretary’s comment was “the last thing” investors wanted to hear.

That issue aside, ahead of Uber’s Q1 results on Wednesday (May 5 AMC), Ives thinks the company is well-positioned to make hay in the post-pandemic environment.

Ives thinks Uber is a “standout name to play the recovery.”  The analyst expects a rebound in “ridesharing metrics over the coming year,” and says that across core markets, delivery continues to surpass expectations. Put together with Uber’s pivot toward “a leaner expense structure,” the company is laying the groundwork for a “snapback in growth and profitability into 2022.” All despite the pandemic still impacting Mobility, which “remains somewhat challenged.”

And while later this year, Uber Eats will face “some challenging comps,” Ives says the company has “built out the foundation of a transformational last-mile delivery company that not only focuses on restaurant delivery but also on grocery, essential goods, and alcohol.”

For Q1, Ives anticipates revenue of $3.29 billion, just a touch above the Street’s forecast for $3.28 billion, and calls for a GAAP EPS loss of ($0.50). Consensus has ($0.54). For the full year, Ives expects revenue to increase by 44.2% year-over-year to $16.1 billion.

All in all, Ives’ rating stays an Outperform (i.e., Buy), backed by a $76 price target. The implication for investors? Upside of 39%. (To watch Ives’ track record, click here)

Almost all on Wall Street agree with the Wedbush analyst’s assessment. Based on 30 Buys vs. 3 Holds, the analyst consensus rates UBER stock a Strong Buy. The average price target comes in at $73.77, suggesting share appreciation of 34% in the year ahead. (See Uber stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.