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Dara Khosrowshahi, chief executive officer of Uber Technologies speaks on a webcast during the company’s initial public offering on the floor of the New York Stock Exchange, May 10, 2019.
Michael Nagle | Bloomberg | Getty Images
Major Wall Street banks came out in big support of Uber on Tuesday with a rush of several buy ratings on the struggling stock.
Most major analysts began coverage on the ride hailing company Tuesday, honoring a typical grace period seen by the underwriting firms and other major analysts. Uber is down 8.3% from the company’s much-hyped May 9th debut at $45 a share. A mostly mixed first earnings report last week has failed to spur a rally in the shares.
But Wall Street thinks this is a buying opportunity for clients. The shares rose 2.8% in premarket trading on the reports. There are now 20 analysts rating Uber and none say to sell the stock, according to Tipranks.com. Sixteen say “buy” and four say “hold.”
“We see Uber as the most attractive Internet IPO since Facebook and believe that concerns related to Uber’s profitability outlook pose less risk than Facebook’s transition to mobile at that time,” Deutsche Bank said. The firm has Uber rated as a buy.
“Uber is a transformational company that should benefit from secular shifts to the sharing economy (Rides), time saving services (Eats), and more efficient marketplace evolution (Freight),” Bank of America said.
Another analyst says the sky is the limit for Uber’s growth opportunities.
“The growth runway is long for Uber’s platform to grow users, and frequency of use across products…and with scale, a path toward profitability.”
To be sure, skeptics will say this is just a typical example of Wall Street trying to hype a new issue it wants investors to buy so they can garner future investment banking business. Still it’s rare to see such an overwhelmingly bullish crowd on a stock.
Here’s what else the major analysts are saying about Uber on Tuesday:
Deutsche Bank – Buy rating
“We see Uber as the most attractive Internet IPO since Facebook and believe that concerns related to Uber’s profitability outlook pose less risk than Facebook’s tran-sition to mobile at that time. We see signs of rationalization in the competitive dynamics in ridesharing. This, combined with the lackluster IPOs of Uber and Lyft, which may curb irrational private funding activity, are likely to result in improving competitive dynamics and contribution margins for Uber. Looking at high contribu-tion margins in selected markets and how quickly Yandex was able to drive profita-bility in its ridesharing business post its consolidation with Uber in Russia gives us confidence in the long-term profit potential at Uber. Putting this together with a massive addressable market, longer-term call options on the Freight business and ATG, the nascent ‘clabis’ rideshare market opportunity, we believe this global leader is well positioned to dominate the TaaS story for years to come. We initiate with a BUY rating and a $58 price target, reflecting a sum-of-the-parts valuation that incor-porates slight premium multiples on Ridesharing and Eats due to their leadership position across multiple markets and business fronts.”
Barclays – Overweight rating
“Initiating Coverage On UBER (OW) And LYFT (EW): Ride-hailing’s future promise is almost equally as impressive as the capital destructed since the inception of “Scorched Earth” strategies. After experiencing two of the worst-received IPOs in technology history, the backdrop for a contrarian like us to be constructive on the space is actually quite interesting right now. We think consensus is too bearish on rides unit economics, which are near breakeven today for Uber and slowly approaching that level for Lyft. At 4x revenue, with higher growth rates than most other large caps we cover, we would dip a toe into the water and take a position, but fully expect the names to continue to chop around a bit (and if the S+P were to continue to trade off, these two have little val-support given the high cash burn). We prefer UBER shares to LYFT based on better unit efficiency but think both are good against-the-crowd longs here. This report is a 100 page deep-dive on from a bottom-up perspective on UBER and LYFT, and we are publishing a companion top-down piece alongside our Global Autos team: See ‘Cutting the car ownership cord’ from Brian Johnson and Kristina Church, 6/4/19).
Mizuho – Buy rating
“We are initiating coverage of Uber with a Buy rating and PT of $50. Uber has a category-leading position in ridesharing, which makes up nearly 70% of its overall TAM of nearly $6tn. The current intense competition will likely rationalize over the next few years due to continued consolidation and listings of private peers. As a result, we believe Uber has ample room to gain operating leverage from economies of scale. We expect Uber to be EBITDA positive by 2022 and achieve a 10.4% margin in 2023. Our PT is based on a SOTP method and 22x our 2023 EBITDA forecast (vs. an estimated CAGR of 35%).”
Morgan Stanley- Overweight rating
“Uber was founded 10 years ago, but we think it is still in the early innings in its core (ridesharing/Eats) and emerging (Freight, Autonomous, New Mobility) opportunities. Uber’s ridesharing user penetration of what we see to be its core demographic (18-50 year old, $50K+ income household) is still only ~20% in its oldest market (the US) and only 6% of the US population overall. International ridesharing total population penetration (estimated 2%) is even lower and Uber Eats (<1% global penetration) is even earlier. The growth runway is long for Uber’s platform to grow users, and frequency of use across products…and with scale, a path toward profitability.”
Bank of America- Buy rating
“Uber is a transformational company that should benefit from secular shifts to the sharing economy (Rides), time saving services (Eats), and more efficient marketplace evolution (Freight). Our thesis is based on: 1) Sector attractive with just 1% penetration of TAM, 2) With Uber & Lyft signaling a more rational environment, adj. net revenue (“ANR”) growth should reaccelerate, 3) Share leadership & network effects are longterm advantages, and profitability in less competitive markets suggests business model can be attractive, 4) Autonomous vehicles will reduce driver dependencies and increase long-term margins, and 5) Consolidation in food delivery sector will be positive for Eats.”
Goldman Sachs- Buy rating
“Uber is the category leader creating what has become a disruptive and challenging market over the course of the last eight years. While we see mobility as a massive opportunity, the path to reaching it is far from a straight line. Though there are already very large companies across the various markets and services, we see long-term leadership in the space as far from settled and believe the risks in ownership across the space, as both the services and the competitors with in them mature, are significant. That said, we believe the risk/reward in owning the leader in this space is favorable and initiate coverage of Uber with a Buy rating and $56 price target.”
Oppenheimer – Outperform rating
“We are initiating coverage on Uber Technologies, Inc. with an Outperform rating and a 12-18 month price target of $55. Uber has carved out a categorical market leader position in ridesharing (65% in most regions and 69% in the US) and online food delivery. Aside from the company’s leading technology, Uber boasts superior network liquidity compared to peers, with more than 93M global monthly active platforms customers. In our view, ridesharing (currently ~1% of TAM) and online food delivery (~15% of TAM) adoption are still underpenetrated globally, and we think Uber’s technology and network liquidity are better positioned than peers to capture additional market share. Our $55 price target implies 4.1x 2020E sales vs. ridesharing/food delivery peers trading at 3.9x and Marketplace peers at 4.9x.”
RBC- Outperform rating
“Initiating with Outperform & $62 PT. Uber is the leading global player in massive ridesharing & meal delivery TAMs, generating robust growth, with leading technologies, products & ops. We also see significant option value in new business units (e.g. Freight). We believe the market underappreciates UBER’s profit potential.”
SunTrust- Buy rating
“Uber is capitalizing on powerful secular trends around the improving technology/ubiquity of personal mobile devices and ever-advancing consumer preferences, to transform a very large but highly inefficient transportation market. Uber dominates Ridesharing (ex. China) with reinforcing network effects in “winner-take-most” markets.”
BTIG- Buy rating
“We are beginning our research coverage into autonomy with Uber and Lyft and are initiating coverage with Buy ratings on both. Our price target is $80 for Uber and $77 for Lyft as detailed below. We believe both companies can deliver profitability on what is effectively a taxi/chauffeur-replacement service. This likely even justifies these companies’ current valuations. However, we believe the reason investors should own these stocks over the long-term will be the role that both can play in an autonomous future.”
Cowen- Outperform rating
“Uber is well-positioned to grow its Ridesharing & Eats units as positive secular trends drive more users and frequency, yielding 20%+ annual bookings growth ’19E-’24E. Our unit contribution profit analyses suggest Ridesharing biz is profitable per trip, while Eats per trip losses will shrink as the biz scales; we est. Uber is EBITDA positive by ’22. Initiate coverage with an Outperform and $58 PT.”
