Uber's Low Growth-Adjusted Multiple Creates An Attractive Entry Point: Morgan Stanley

Zinger Key Points
  • Uber's Bargain Buy? Morgan Stanley sees Uber as undervalued compared to Lyft and Maplebear, with a promising $90 target.
  • Uber's Robust Roadmap: Analyst highlights Uber's growth potential and diverse strategies amidst emerging autonomous driving challenges.

Morgan Stanley analyst Brian Nowak reiterated an Overweight rating on Uber Technologies, Inc UBER with a price target of $90.

Nowak flagged that UBER’s growth-adjusted multiple is now lower than Lyft, Inc LYFT and Maplebear Inc CART, which creates an attractive entry point. 

He highlighted that this pullback has come as investors need more confidence in upward revisions. At the same time, fears around Robotaxi and autonomous driving disruption have re-emerged following the release of Tesla Inc’s TSLA new autonomous capabilities and the announcement of its Robotaxi event on August 8. 

Also Read: Tesla’s Robotaxi Plans: Potential Threat Or Future Partner For Uber?

Nowak noted that the Morgan Stanley Alphawise Survey shows ample growth runway, and Uber’s multi-product rides and cross-platform strategies are set to drive adoption, frequency, and profitable growth. He also detailed Uber Eats’ suburb opportunity and the LATAM rides opportunity, given DiDi Global Inc’s DIDIY potential pullback in investment. 

Nowak noted a 30% upside to his $90 Uber price target, which implies paying 22X fiscal 2025 EBITDA or a ~4% fiscal 2025 free cash flow (FCF) yield. 

On an FCF to growth basis, Nowak’s price target implies a 0.8 FCF to growth multiple, in line with DoorDash, Inc DASH

 and a ~10-20% premium to LYFT and CART is justified, given UBER’s leading scale, market position, and ability to drive growth and FCF. 

On LYFT, Nowak noted reasonable forward growth and profitability, with a slightly negative tactical skew (in particular, vs. UBER).  He noted reasonable forward growth and profitability on CART but with a somewhat positive skew.

Uber Technologies stock gained over 85% in the last 12 months. Investors can gain exposure to the stock via First Trust US Equity Opportunities ETF FPX and Global X Millennial Consumer ETF MILN.

Price Action: UBER shares traded higher by 3.22% at $71.46 at the last check Monday.

Also Read: Uber Vs. London’s Black Cab: Company Faces $310M Claim from Drivers

Photo by Alex Photo Stock on Shutterstock

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