Market Overview

JPMorgan Finds 4 Reasons To Share A Ride With Uber's Stock

Share:
JPMorgan Finds 4 Reasons To Share A Ride With Uber's Stock

Uber Technologies Inc (NYSE: UBER) holds a leadership position in its two main driving units and the stock looks "attractive" at around 3.3 times 2020 estimated adjusted net revenue, according to JPMorgan.

The Analyst

Doug Anmuth initiated coverage of Uber's stock with an Overweight rating and $51 price target.

The Thesis

Uber's stock should be bought by investors for four key reasons, Anmuth wrote in the note.

First, the ride-share environment is shifting away from an era dominated by incentives to fuel growth. In fact, Uber's Rides' take rate improved by 200 basis points from the first quarter of 2019 to the third quarter. While further rationalization will be "gradual," Uber and rival Lyft will reduce couponing and increase their prices.

Second, Uber is focused on new product innovation, including an all-in app that combines Rides, Eats, Transit, Bikes & Scooters, Grocery and More, the analyst wrote. The company also rolled out new rewards offering to help improve loyalty and retention on the platform. As it stands now customer loyalty is "very low" but a focus on improving products and the overall experience could lead to higher engagement and frequency.

Third, Uber is expected to generate "significant profitability" based on recent momentum. For example, EBITDA margin as a percentage of adjusted net revenue improved from negative 79% in 2016 to negative 22% in 2019 with profitability expected in 2021.

The company's recent decision to exit the Indian and Korean food-delivery market and its ability to drive leverage across several operating expenditure lines will help the bottom line.

Finally, Uber continues to invest in long-term opportunities, including Freight, New Mobility, and Autonomous Vehicle Technology, the analyst wrote. Freight alone is expected to account for 12% of total adjusted net revenue in 2024 and will be counted on as a "hedge" against competition from autonomous rivals.

Price Action

Shares of Uber were down by 1.15% to $36.25 at time of publication.

Related Links

"The Broker Wars": Big Bets Pit New Entrants Against Incumbents

3 Big Questions About Uber's Stock From UBS

Latest Ratings for UBER

DateFirmActionFromTo
Feb 2020OppenheimerMaintainsOutperform
Feb 2020CFRAMaintainsBuy
Feb 2020DA DavidsonMaintainsNeutral

View More Analyst Ratings for UBER
View the Latest Analyst Ratings

Posted-In: Doug Anmuth Food DeliveryAnalyst Color Upgrades Price Target Initiation Analyst Ratings Tech Best of Benzinga

 

Related Articles (UBER)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
YDeutsche BankMaintains915.0
CAKEDeutsche BankMaintains41.0
DISHSunTrust Robinson HumphreyMaintains38.0
SGMSDeutsche BankMaintains23.0
GDOTSunTrust Robinson HumphreyMaintains48.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com