On Thursday, Deutsche Bank (ETR:DBKGn) exhibited increased confidence in Uber Technologies Inc . (NYSE: NYSE:UBER), as it raised the company's price target to $95 from the previous $82, while maintaining a Buy rating. The adjustment follows Uber's recent analyst day, which took place on Wednesday, where the company presented a three-year outlook that surpassed Wall Street expectations. Additionally, Uber announced a substantial $7B share repurchase program.
Uber's analyst day, occurring just a week after a solid fourth-quarter report, highlighted ambitious growth plans. The company anticipates its Gross Bookings (GBs) to rise at a mid-to-high teens compound annual growth rate (CAGR) over the next three years. This growth is expected to be fueled by an increase in Monthly Active Platform Consumers (MAPCs) and higher usage frequency. Furthermore, Uber projects a high-30s to 40 percent adjusted EBITDA three-year CAGR, as it scales GBs and achieves annual margin expansion in both Mobility and Delivery segments.
The ride-hailing giant also expects free cash flow (FCF) conversion to exceed 90 percent of adjusted EBITDA. This includes adjustments for insurance reserves, with the cash tax anticipated to be significantly lower than the accrual, thanks to the utilization of loss carryforwards. These financial forecasts have reinforced Deutsche Bank's positive outlook on Uber's potential for growth in MAPCs and frequency across its platform.
Uber's inaugural $7B share repurchase program is anticipated to more than compensate for dilution over time. This move is seen as a strategy to manage capital efficiently for shareholders while leveraging the company's scale for long-term profitable growth. The new price target of $95 implies a 23x FY25E enterprise value/EBITDA multiple, adjusted from a 29x FY24E EV/EBITDA, as the valuation year shifts to FY25. According to Deutsche Bank, this price target also reflects a 27x FY25 free cash flow multiple, which is considered favorable compared to other large-cap consumer peers, especially considering Uber's low 40 percent CAGR in FCF from FY23 to FY26.
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