I am bullish on Uber Technologies (UBER) as it has very strong growth potential, its price target implies significant upside, and Wall Street analysts are overwhelmingly bullish on it.
Uber Technologies Inc., better known as Uber, is a ridesharing company based in San Francisco, California and operates in more than 10,000 cities.
It was founded in 2009 and changed the global transportation world. It went public in May 2019, 10 years after it was founded. In addition to rides on-demand, Uber also operates in other areas, including food delivery via Uber Eats, and business and transport via Uber Freight and Uber for Business.
Strengths
Uber has already disrupted the transportation industry but is seeking to innovate further by investing in self-driving technology, urban air transport, and optimizing freight solutions.
While Uber started off in the U.S., it is now available in 72 countries and nearly 10,000 cities. The company boasts almost 18 million daily trips and 109 million monthly active consumers as of September 30, 2021.
Because Uber has changed the landscape of transportation, it remains a popular choice for ridesharing despite alternatives such as Lyft. In fact, in many countries, Uber has become synonymous with ridesharing.
Recent Results
For Q3 of 2021, Uber’s gross bookings reached $23.1 billion. In addition to this being an all-time high for the company, it’s also a 57% increase year-over-year and a 53% increase if looked at from a constant currency perspective. This resulted in almost 18 million daily trips and 1.64 billion trips during the quarter.
While there was a $2.4 billion net loss, this included a $2-billion pre-tax net headwind, mostly because of equity revaluation. Additionally, Uber’s unrestricted cash and cash equivalents totaled $6.5 billion by the end of Q3 of 2021.
Valuation Metrics
UBER stock is very difficult to value as it trades at a high enterprise value-to-EBITDA multiple of 82x on a forward-looking basis, and is not generating GAAP profits, though it is expected to continue growing at a rapid pace for the foreseeable future.
In 2022, analysts expect the company to grow revenues by 47.9%, EBITDA by 279.4%, and normalized earnings per share by 112.7%.
Wall Street’s Take
According to Wall Street analysts, UBER earns a Strong Buy analyst consensus based on 18 Buy ratings in the past three months. Additionally, the average UBER price target of $68.94 puts the upside potential at 77.3%.
Summary and Conclusions
UBER stock has massive upside potential as the stock has floundered on a relative basis since its IPO a few years ago. It has long-term growth potential as the mobility industry transitions towards electric taxi services. This plays to UBER’s strengths and gives it high upside potential.
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