The analysts' sentiment trends are positive, indicating a 40% rise in Uber (NYSE:UBER) shares over the next year. The takeaways from the chatter are that this company is well-positioned to drive accelerating earnings growth and FCF over the next five years while contributing to the advancement of AI. Uber uses AI to enhance operations, improve services, and drive profitability at all levels of its operations, centred on Michaelangelo. Michelangelo is the company’s machine-learning platform for developing and deploying apps at scale.
The analysts' sentiment trends include increasing coverage, firm sentiment, and a rising price target, which combine to provide a strong tailwind for the market. The number of analysts covering the stock increased by 20% over the last year, while the price target increased by 60%. The activity in the first week of January aligns with those trends, including notable mentions from three major investment firms. Analysts at Bank of America, Citigroup, and Goldman Sachs added Uber to their high-conviction growth stock lists for 2025. Consensus in early January forecasts a 40% rise for this market from the 2025 opening bid.
Uber’s Results Drive a Robust Outlook
Uber’s 2024 results show the company is gaining traction. Expanding into delivery verticals was the key to unlocking long-term growth and profitability, accelerating and improving sequentially. The forecast for FQ4 is for growth to sustain at a near-20% pace, which is likely low.
However strong the growth is, profitability drives the stock price action. The company is driving wider margins and is expected to continue improving them as the year progresses. Proof of the improvement is in the FCF, $2.1 billion in FQ3, up 133% year-over-year and nearly 19% of revenue, sufficient for robust share repurchases and debt reduction. The company plans to redeem $2 billion in the current quarter, reducing its debt position by 20% and strengthening an already rock-solid balance sheet. Uber’s balance sheet is in a fortress condition with leverage of less than 1x equity and ample cash and liquidity.
Uber validated analysts' faith when it announced a $1.5 billion accelerated share repurchase authorization. The authorization, part of the $7 billion allotment approved in 2024, is worth about 1% of the market and is expected to be completed in Q1 2025. Share repurchases in FQ3 reduced the count by 2.1% and are expected to continue at a solid pace indefinitely, given the outlook for earnings and free cash flow.
The Risk Is Autonomous Vehicles
The risk for Uber and its investors is autonomous vehicles. Autonomous technology is advancing, and ride-sharing businesses like Uber could be out of business because of it. Companies like Tesla (NASDAQ:TSLA) and Waymo are the likely disruptors; however, Uber is well-positioned and likely to benefit more from autonomous driving than be hurt. Tesla has yet to build its ride-hailing infrastructure, which Uber already has in place. The obvious move is to partner with businesses and individuals to operate fleets of self-driving delivery vehicles.
Uber: A Bumpy Ride to Higher Share Prices
Uber stock is trending higher, but it has been bumpy for the last two years. The price action in early January is down sharply from a peak in late 2024 but is already showing signs of the subsequent rebound. Support is present at nearly $60, which will likely keep this market moving sideways if it can’t sustain upward momentum now.
The critical resistance is near the short-term 30-day EMA at $69; a move above it would allow the market to retest its recent highs. The critical support is near $59 but may be as low as $56.