Mizuho analysts told investors in a note Monday that the firm is constructive on Uber (NYSE:UBER) into the quarter despite positive investor expectations.
The analysts, who have a $50 price target on Buy-rated Uber, told investors that air travel data is positive for Mobility's profitability and that based on airport and flight tracking in the US and Europe, they "continue to see a normalization in 1Q23, driving a mix shift to airport rides and Reserve that are high-margin products in the Mobility portfolio."
In addition, they noted that Consensus Mobility GB "appears achievable" if not conservative as the first quarter seasonal lift is "consistent with historical patterns with the potential to gain share as the category leader."
Meanwhile, Mizuho believes favorable unit economics are likely to remain. "The slowing economy has had a positive impact on driver supply and customer acquisitions, two major cost items for ride-sharing," the analysts explained.
"As a result, driver incentives came down meaningfully compared to last year but are still elevated compared to FY19, indicating more room to go down in FY23. At the same time, customer acquisition costs should remain subdued due to competitors pulling back on consumer incentives. With that in mind, we expect the mobility take-rate to remain in an upward trajectory, which is a good sign for profitability."
All in all, Mizuho believes the risk/reward for Uber is attractive due to strong support to FY23E EBITDA and "compelling relative valuation."