On Tuesday, Wolfe Research initiated coverage on Uber Inc. (NYSE:UBER) with an Outperform rating and a price target (PT) of $90.00. The firm's positive outlook on the ride-hailing giant is based on several key factors, including the company's strong market position and the expectation of continued healthy demand for its core offerings.
According to Wolfe Research, Uber's competitive edge is reinforced by its diverse range of services and expansion into new product categories and geographical areas. These strategic moves are expected to drive growth alongside the company's efforts to enhance profitability and implement share buybacks.
The Outperform rating is supported by a valuation that applies a 20x multiple to Uber's forecasted FY25 enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which represents a modest premium over the median of the comparable group at 14.9x. Wolfe Research's price target reflects confidence in Uber's industry leadership, the effectiveness of its membership programs, and its ability to generate healthy free cash flow (FCF).
Uber's current trading metrics show that the company is valued at 18.8x FY25 EBITDA and 34.6x FY25 earnings per share (EPS), compared to its 5-year historical median multiples of 18.8x EBITDA and 50.4x EPS. The Wolfe Research analyst highlighted these figures to provide context for the new price target and rating.
In other recent news, Uber Technologies Inc . (NYSE:UBER) has been involved in a series of legal and strategic developments. The Court of Appeal in the United Kingdom recently reversed a previous decision that would have required private-hire taxi operators to pay a 20% value-added tax (VAT) on their profit margins for services outside of London, a legal challenge initially initiated by Uber.
On the other hand, the Massachusetts Supreme Judicial Court has ruled in favor of allowing voters to determine if drivers for app-based services such as Uber should be recognized as independent contractors with access to certain benefits.
Uber also announced the "One Less Car" initiative, offering $1,000 in credits to select car owners in the United States and Canada who agree to stop using their cars for five weeks. This move aims to reduce emissions and promote the use of public and other transportation services. Furthermore, the 9th U.S. Circuit Court of Appeals dismissed a lawsuit alleging that Uber's policy of terminating drivers based on passenger ratings was racially biased.
In the financial realm, Citi has increased its price target for Uber shares to $96, up from the previous target of $93, citing confidence in the company's ability to meet its growth targets. This decision follows a series of meetings with Uber's management, highlighting Uber's strategic focus on increasing the supply of earners and the expansion of its service applications worldwide.
InvestingPro Insights
Uber Technologies Inc. (NYSE:UBER) has been making significant strides in the market, and recent analysis from InvestingPro reinforces the optimistic outlook presented by Wolfe Research. With a remarkable year-to-date price total return of 17.41% and an impressive 61.54% return over the last year, Uber's stock performance underscores the company's robust market position. InvestingPro Tips suggest that Uber is trading at a low P/E ratio relative to near-term earnings growth, which could indicate an attractive investment opportunity for those looking at the fundamentals.
The company's financial health is further highlighted by a strong revenue growth of 14.01% over the last twelve months as of Q1 2024, and an even more notable gross profit margin of 32.36%. Additionally, Uber's EBITDA growth of 430.62% in the same period demonstrates the company's efficiency in converting revenue into actual earnings, which could be a testament to its operational effectiveness.
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