Oppenheimer maintained an Outperform rating on Uber Inc. (NYSE:UBER), increasing the price target to $95 from the previous $90. This adjustment follows a comprehensive survey of 1,451 participants, which revealed a positive outlook for the company's restaurant and grocery delivery services.
The survey found that 64% of restaurant delivery users and 70% of grocery delivery users are spending more now compared to six months ago. According to the findings, there is an untapped potential for increasing the frequency of orders among current users of restaurant delivery services. Consequently, the firm has adjusted its Gross Transaction Value (GTV) projections for Uber Delivery, raising estimates by 2% for the years 2025 and 2026.
Despite the economic challenges affecting cost-conscious consumers, the survey highlighted that a significant 71% of non-users were not aware of potential savings through monthly subscriptions. This indicates a substantial opportunity for Uber to attract new customers by enhancing their marketing strategies to better promote these savings.
Grocery delivery has seen less penetration than restaurant delivery, with a 10-point difference in respondents using the services (57% for grocery delivery versus 67% for restaurant delivery). Furthermore, 73% of those surveyed expressed a preference for in-person shopping, which is likely to continue as a challenge for grocery delivery in the near term.
However, Oppenheimer anticipates that upcoming in-store initiatives could present a significant long-term advertising opportunity. The firm's unchanged price target of $48 for this segment is based on a 13x multiple of the estimated 2025 EBITDA, which represents a 33% discount compared to peers. This valuation also factors in a slower EBITDA growth rate of 26% from 2024 to 2026, relative to its peers.
Uber Technologies (NYSE:UBER) has been active in the autonomous vehicle sector, partnering with Chinese firm WeRide to introduce robotaxis in the United Arab Emirates.
The initiative is set to commence in Abu Dhabi in 2024, leveraging WeRide's unique opportunity as the holder of the UAE's sole national license for self-driving vehicles. This follows Uber's expanded partnership with Alphabet (NASDAQ:GOOGL)'s Waymo, launching robotaxi services in Austin and Atlanta.
Uber has formed a delivery partnership with Darden Restaurants (NYSE:DRI), set to begin at select Olive Garden locations in late 2024. The collaboration aims to meet growing customer demand for home delivery options.
InvestingPro Insights
Following Oppenheimer's positive outlook on Uber Inc. (NYSE:UBER), InvestingPro data and tips provide further insights into the company's financial health and market position. The market capitalization of Uber stands at a robust $161.12 billion, affirming its significant presence in the market. Despite a high P/E ratio of 78.7, the company's expected net income growth this year and upward earnings revisions from three analysts underscore confidence in its profitability. Moreover, Uber's revenue has shown a healthy growth of 14.44% over the last twelve months as of Q2 2024, which is in line with Oppenheimer's enhanced GTV projections for Uber Delivery.
InvestingPro Tips highlight that Uber is trading at a low PEG ratio of 0.14, suggesting that its earnings growth could be undervalued relative to its peers. This is particularly relevant for investors looking for growth opportunities in the Ground Transportation industry, where Uber is a prominent player. Additionally, the company's strong return over the last year, with a price total return of 69.89%, indicates a favorable market reception to its business strategies and performance.
For readers interested in further detailed analysis and additional tips, InvestingPro offers a comprehensive list of 14 InvestingPro Tips for Uber, which can be explored to gain deeper investment insights (https://www.investing.com/pro/UBER).
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.