Uber’s (UBER) Delivery business is thriving on the back of pandemic-led restrictions. The company’s focus on expanding this segment is noteworthy.
As part of these efforts, Uber inked an agreement in June to acquire a 47% interest in grocery app Cornershop. Additionally, Uber’s Freight unit is also in line to acquire transportation management software provider Transplace, in a bid to bolster its shipment delivery capabilities.
I am bullish on Uber’s return-generating prospects. (See Uber stock charts on TipRanks)
Notably, In the second quarter of 2021, Delivery revenues constituted 50% of Uber’s total revenues, surging more than 100% year-over-year.
Uber’s laudable financial discipline is notable. Despite pandemic-induced challenges, Uber was able to narrow down its adjusted EBITDA losses last year by 7% on a year-over-year basis. Moreover, the figure contracted by 40% year-over-year in the first half of this year. The company expects its adjusted EBITDA loss to reduce further in Q321, before generating adjusted EBITDA profits in Q421 onwards.
Recently, Wells Fargo analyst Brian Fitzgerald significantly raised his expectations for Uber’s gross Delivery bookings in Q321, FY21, FY22, and FY23, by $1.4 billion, $1.4 billion, $1.6 billion and $1.8 billion respectively.
Moreover, Fitzgerald also raised his revenue projections for Q321 by $10 million, for FY21 by $20 million, and for FY22 by $24 million.
GAAP EPS expectation by the analyst, on the other hand, remained unchanged at $0.36 for Q321, but increased by a cent each to $0.08 and $0.85 for FY21 and FY22 respectively.
After the outlook adjustments, Fitzgerald maintained his positive stance on Uber with a Buy rating, and a $78 price target, which carries a 96% upside potential from current levels.
He supported his sentiment by stating Uber to be a “market leader in the Ridesharing and Meal Delivery industries globally.”
“We think Uber’s strong capital position and variable cost structure will limit the risk of insolvency during an economic downcycle,” he concluded.
Wall Street also seems to be optimistic, with a consensus rating of Strong Buy on Uber, based on 23 Buys and two Holds. The average Uber price target of $68.52 indicates an upside potential of 72.2%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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