On Thursday, Oppenheimer has adjusted its price target for Uber Technologies Inc . (NYSE:UBER) from the previous $95.00 to $85.00, while maintaining an Outperform rating for the company's stock. The revision reflects a tempered forecast for Uber's Mobility bookings, although this is partially balanced by better-than-expected Delivery bookings and margins.
Management has highlighted a shift towards more affordable Mobility options and geographies, increased insurance costs leading to higher fares, and a decline in weekend usage. Additionally, there has been a noted slowdown in usage frequency, growing at +3% year-over-year compared to the second quarter's +6%.
Despite these challenges, there are positive developments for the ride-hailing giant. The Uber One membership program has seen a significant increase, with a 70% year-over-year growth, and is on a trajectory to hit 35 million members by the end of 2025. This growth emphasizes Uber's advantage as a first mover in the market.
The firm's analysis suggests that Uber will continue to find opportunities to collaborate with original equipment manufacturers (OEMs) for its anticipated robotaxi services. The financial forecasts for the coming years have been adjusted, with Mobility Gross Bookings (GB) expected to rise by 17% year-over-year in FY25, and Delivery Gross Bookings anticipated to increase by 19% and 14% in FY25 and FY26, respectively. The total EBITDA is projected to grow by 32% and 27% year-over-year for the same periods.
The new price target is based on a 16x multiple of Uber's forecasted FY26 EBITDA, representing a 16% premium compared to its peers. This valuation is underpinned by the expectation that Uber's EBITDA will grow 13% faster from FY24 through FY26 compared to its competitors. The current price target suggests that Uber shares are trading at approximately 14 times the projected FY26 EBITDA.
In other recent news, Uber Technologies Inc. surpassed Q3 profit forecasts despite experiencing its slowest growth in gross bookings in over a year. The company reported a Q3 profit that exceeded Wall Street's expectations, with gross bookings for the quarter increasing by 16.1% to $40.97 billion. Uber's overall revenue for the third quarter was $11.19 billion, surpassing analysts' projections of $10.98 billion. Uber's net income for the quarter stood at $2.61 billion, which included a $1.7 billion pre-tax gain from the company's equity investments.
In the face of competition from Tesla (NASDAQ:TSLA)'s potential entry into the rideshare market, BTIG maintained its Buy rating on Uber, seeing a partnership between rideshare companies and autonomous vehicle (AV) developers as a capital-efficient strategy. Meanwhile, BofA Securities raised its price target for Uber's shares, anticipating a strong third-quarter performance. Erste Group upgraded Uber's stock rating from Hold to Buy, reflecting confidence in the company's potential for significant revenue, operating income, and net profit increases in the upcoming quarters.
Uber has also been exploring growth opportunities beyond its core ride-sharing business, including potential acquisition talks with Expedia (NASDAQ:EXPE) Group Inc. Despite facing legal challenges, such as lawsuits alleging misclassification of drivers as independent contractors, Uber's resilience and adaptability are evident. The company's diverse portfolio, including freight, delivery, and ride-hailing services across various global markets, has provided a cushion against sector-specific risks.
InvestingPro Insights
Uber's financial performance and market position align with Oppenheimer's optimistic outlook. According to InvestingPro data, Uber's revenue growth remains strong, with a 15.93% increase in the most recent quarter. This growth supports the analyst's expectations for continued expansion in Mobility and Delivery bookings.
InvestingPro Tips highlight that Uber is a "Prominent player in the Ground Transportation industry" and has shown a "High return over the last year," with a one-year price total return of 83.53%. These factors reinforce Uber's market leadership and potential for future growth, as discussed in the article.
The company's profitability outlook is positive, with InvestingPro Tips noting that "Net income is expected to grow this year" and "Analysts predict the company will be profitable this year." This aligns with the article's mention of adjusted EBITDA growth projections.
For investors seeking more comprehensive analysis, InvestingPro offers 13 additional tips for Uber, providing a deeper understanding of the company's financial health and market position.
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