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Uber: Strong Quarter Ahead

Uber Technologies, Inc. (UBER) saw its stock climb more than 11% yesterday, after the firm said in an SEC filing that it had improved its forecast.

The transportation networking firm, based in San Francisco, provides services such as ride-hailing, food delivery, package delivery, couriers, and freight transportation.

Uber has struggled with supply-demand mismatches throughout the pandemic, leading to exorbitant trip costs. However, as the economy recovers and vaccination rates rise, more drivers return to the platform, reducing the supply-demand imbalance.

Furthermore, Uber is noticing an uptick in customer demand for online food ordering, as well as a comeback in cab reservations. Thus, I am bullish on Uber stock. (See UBER stock charts on TipRanks)

Uber Aims for a Profitable Quarter

Management gave a favorable outlook on gross bookings and adjusted profits before interest, taxes, depreciation, and amortization (EBITDA).

Uber predicts gross bookings of $22.8-$23.2 billion in the third quarter, up from $22-$24 billion previously forecast. In addition, adjusted EBITDA is now expected to be between a loss of $25 million and a profit of $25 million, against a previously expected loss of $100 million.

Uber claimed that, on an adjusted EBITDA basis, it expects to make a profit in the fourth quarter, owing to its emphasis on growth efforts.

Uber CFO Nelson Chai said, “With positive Adjusted EBITDA in July and August, we believe Uber is now tracking towards Adjusted EBITDA breakeven in Q3, well ahead of our prior guidance.”

I believe that Uber’s profitability at the operational level is critical at this point in the game. The idea that this ride-sharing firm may be able to produce profits sooner than planned has sparked investor excitement, as seen by the surging share price.

What Analysts are Saying about Uber Stock

In response to the updated guidance news, MKM Partners analyst Rohit Kulkarni maintained a Buy rating on Uber with a price target of $68, which carries a 53.3% upside potential from current levels.

The management’s positive adjusted EBITDA outlook, according to Kulkarni, is a “clear good indication” of the company’s prospects.

Furthermore, he feels that the latest guidance alleviates many of the stock’s uncertainties, which have been building since Q2 earnings, owing to “uncertain profitability outlook unclear spend outlook on driver incentives.”

The rest of the Street is bullish on the stock and has a Strong Buy consensus rating, based on 24 Buys and 2 Holds.

As for price targets, the average Uber price target of $68.88 implies 55.3% upside potential to current levels.

Disclosure: On the date of publication, Shalu Saraf had no position in any of the companies discussed in this article.

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