On Monday, Melius Research initiated coverage on Uber Technologies Inc . (NYSE:UBER) with a Hold rating and a price target of $77.00. The new coverage highlights Uber's status as a trailblazer in the rideshare sector and its varied range of services, which include mobility, delivery, and freight operations.
The company's mobility segment has been expanding its product offerings to better meet customer demand and scaling up both in the U.S. and internationally. Uber has also been focusing on cross-selling between its mobility and delivery services, with a third of its monthly consumers utilizing multiple products.
This strategy has been effective in increasing market penetration in established markets and cutting costs, with a noted 50% reduction in incremental customer acquisition costs through paid channels.
Uber is expected to maintain a robust growth trajectory, with gross bookings projected to grow at a mid to high-teens compound annual growth rate (CAGR) over the next three years, slightly above the market consensus of 16%. Additionally, the company's EBITDA is forecasted to surge at an annual rate of 30% to 40%, aligning closely with the Street's expectation of a 39% annual increase.
The analyst's commentary underscores Uber's continued efforts to scale and diversify its business. The $77 price target set by Melius reflects confidence in Uber's strategic initiatives and its potential for sustained growth in the coming years.
In other recent news, Uber Inc. has been a prominent figure in several recent developments. Wolfe Research initiated coverage on Uber with an Outperform rating, highlighting the company's strong market position and expectations of continued demand for its services. The firm's valuation applies a 20x multiple to Uber's forecasted FY25 EV/EBITDA, reflecting confidence in Uber's industry leadership and ability to generate healthy free cash flow.
Legal developments have also been a focus for Uber. The Court of Appeal in the United Kingdom reversed a decision requiring private-hire taxi operators to pay a 20% value-added tax on profit margins for services outside of London. This was initially a challenge initiated by Uber. In Massachusetts, the Supreme Judicial Court ruled in favor of allowing voters to decide if drivers for app-based services like Uber should be recognized as independent contractors with access to certain benefits.
Uber has also launched the "One Less Car" initiative, offering $1,000 in credits to select car owners in the U.S. and Canada who agree to stop using their cars for five weeks. This initiative aims to reduce emissions and promote the use of public and other transportation services. Additionally, the 9th U.S. Circuit Court of Appeals dismissed a lawsuit alleging that Uber's policy of terminating drivers based on passenger ratings was racially biased.
Lastly, Citi increased its price target for Uber shares to $96, up from $93, citing confidence in the company's ability to meet its growth targets. This decision followed a series of meetings with Uber's management, underlining Uber's strategic focus on increasing the supply of earners and expanding its service applications worldwide.
InvestingPro Insights
InvestingPro data and analysis provide a deeper dive into Uber Technologies Inc.'s financial health and market position. With a market capitalization of $140.65 billion and a high price-to-earnings (P/E) ratio of 99.44, Uber is trading at a premium based on near-term earnings growth. Despite this premium, the company's PEG ratio, which measures the relationship between the P/E ratio and earnings growth, is relatively low at 0.74, suggesting that investors may be expecting robust earnings growth in relation to the P/E ratio.
Uber's revenue for the last twelve months as of Q1 2024 stands at $38.59 billion, demonstrating a healthy growth of 14.01%. Moreover, the company's gross profit margin is solid at 32.36%, indicating its ability to maintain profitability amidst its expansion efforts. Investors should note that analysts predict Uber will be profitable this year, which is corroborated by the company's positive operating income margin of 4.0%.
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