Wells Fargo Upgrades Uber, Sees More Compelling Price

Shares of Uber Technologies Inc UBER have lost 45% since Feb. 6, versus a 28% decline for the S&P 500, and shares are now attractively priced, according to Wells Fargo.

The Uber Analyst

Brian Fitzgerald upgraded Uber from Equal-Weight to Overweight, while reducing the price target from $45 to $41.

The Uber Thesis

Uber’s value is still dependent on growth trends and this will play out only after the coronavirus-driven disruptions have subsided, Fitzgerald said in a note. He said growing smartphone penetration and continued shift in spend among riders from personal car ownership to ridesharing as favorable trends for the company.

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Uber is well positioned for the challenging times ahead. Fitzgerald said the company is unlikely to face liquidity issues, as it exited fiscal 2019 with $10 billion of unrestricted cash and has a $2 billion revolver and $1.5 billion in covenant-free debt due in 2023.

Even with an 80% decline in volume in its Ridesharing segment, Uber will still exit fiscal 2020 with $4 billion of unrestricted cash, the analyst said.

“Two-thirds of Uber’s cost structure is variable, creating an automatic shock absorber against decreasing revenues," he wrote in the note.

Fitzgerald expects Uber to emerge from the crisis as a consolidator in the Meal Delivery space.

UBER Price Action

Shares of Uber rose 15% to $23.66 at time of publication Friday.