On Thursday, BMO Capital maintained its positive stance on Uber Inc. (NYSE: UBER), reiterating an Outperform rating and a $92.00 price target. The firm responded to Uber's approximately 12% share value drop following a 2% miss in third-quarter Mobility Bookings. BMO Capital views the market reaction as excessive and maintains confidence in the company's growth trajectory.
They forecast $13 billion in U.S. Mobility Bookings as Uber shifts research and development efforts towards serving suburban areas. The firm also adjusted its Delivery estimates upward, citing Uber's underpenetration in global markets and effective execution.
Uber's third-quarter performance was impacted by challenging comparisons, including the Taxi service launch in New York City and Los Angeles, and moderated price increases due to lower insurance cost pass-through. Despite these factors, BMO Capital's long-term thesis for Uber remains unchanged, with a particular focus on the suburban customer segment.
In the UK and France, suburban growth rates are three to four times higher than those in urban areas. The firm commends Uber's strategic allocation of additional R&D resources to capitalize on this market.
The company's Delivery service is also exhibiting strong performance, with fourth-quarter guidance surpassing both BMO and Street projections. BMO Capital now anticipates an 18% growth in Delivery Bookings for the fourth quarter, compared to the previously expected 15%.
This is attributed to increased order frequency, with 16% of Delivery users now purchasing groceries and retail items, marking a 2% year-over-year increase. Investments in ranking and recommendation features are expected to further enhance merchant and consumer engagement, driving sustained mid-teen or higher Delivery Bookings growth through 2026.
Uber's collaboration with Waymo on autonomous vehicles (AVs) has reportedly resulted in high rider satisfaction, which bodes well for the upcoming broader launches in Atlanta and Austin in 2025. AVs are anticipated to enhance the overall rider experience and solidify Uber's position as a leading third-party partner for original equipment manufacturers (OEMs).
Additionally, Uber One membership has seen a significant 70% year-over-year increase, with memberships now exceeding 25 million, up from 19 million in early 2024. These members, who account for 35% of Gross Bookings, spend three times more than non-members, contributing to Uber's revenue growth. While BMO Capital has slightly raised its Bookings estimates for 2024 and 2025, the firm maintains its EBITDA forecasts, despite increased R&D and insurance costs.
The revised Gross Bookings are now projected at $162.1 billion and $187.1 billion, respectively, primarily driven by the Delivery segment's performance. Adjusted EBITDA expectations remain at $6.5 billion and $8.7 billion for the same periods. However, BMO Capital notes that rising insurance costs could have negative implications for Lyft (NASDAQ:LYFT), Uber's competitor.
In other recent news, Uber Technologies Inc . (NYSE:UBER) has been a subject of various financial firms' attention. Uber recently surpassed Q3 profit forecasts, with gross bookings for the quarter increasing by 16.1% to $40.97 billion. The company's overall revenue for the third quarter was $11.19 billion, surpassing analysts' projections of $10.98 billion. Uber's net income for the quarter stood at $2.61 billion, which included a $1.7 billion pre-tax gain from the company's equity investments.
Oppenheimer has adjusted its price target for Uber from the previous $95.00 to $85.00, maintaining an Outperform rating for the company's stock. This was due to a tempered forecast for Uber's Mobility bookings, balanced by better-than-expected Delivery bookings and margins. Despite the challenges, Uber One membership program saw a 70% year-over-year growth.
BTIG maintained its Buy rating on Uber, seeing a partnership between rideshare companies and autonomous vehicle developers as a capital-efficient strategy, despite Tesla (NASDAQ:TSLA)'s advancements in autonomous vehicle technology. BofA Securities raised its price target for Uber's shares, anticipating a strong third-quarter performance. Erste Group upgraded Uber's stock rating from Hold to Buy, reflecting confidence in the company's potential for significant revenue, operating income, and net profit increases in the upcoming quarters.
InvestingPro Insights
Uber's recent market performance and strategic initiatives align with several key insights from InvestingPro. The company's market cap stands at an impressive $147.76 billion, reflecting its dominant position in the ground transportation industry. This is further supported by an InvestingPro Tip highlighting Uber as a "prominent player in the Ground Transportation industry."
The article's discussion of Uber's growth potential in suburban areas and its delivery service expansion is reinforced by InvestingPro data showing a robust revenue growth of 14.44% over the last twelve months, with quarterly revenue growth at 15.93%. This growth trajectory is complemented by an InvestingPro Tip indicating that "net income is expected to grow this year," which aligns with BMO Capital's positive outlook on the company.
Uber's financial health appears strong, with the company operating at a moderate debt level according to another InvestingPro Tip. This financial stability, combined with the company's growth prospects, may explain why 4 analysts have revised their earnings upwards for the upcoming period, as noted in an additional InvestingPro Tip.
For investors seeking more comprehensive analysis, InvestingPro offers 11 additional tips that could provide further insights into Uber's market position and financial outlook.
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