Shares of ride-hailing giant Uber (UBER) can’t get a break. Hampered by losses and underwhelming earnings reports, the stock slid badly following a much-hyped IPO. In January, the company's share price finally started gaining traction, but over the last month, the trend has been reversed again. Overall, Uber is down 50% from last year's IPO price.
The severe downturn, according to Wells Fargo’s Brian Fitzgerald represents “long term secular growth at half price.” The 5-star analyst upgraded Uber from Equal Weight to Overweight. The impact of the coronavirus on bookings, means the upgrade comes with a lower price target, down from $45 to $41. The revised figure still implies upside of a huge 83%. (To watch Fitzgerald’s track record, click here)
Although across the board, even companies with minimal exposure to the virus have taken a beating since the outbreak began, Uber’s pullback appears logical due to the company’s core premise: people staying in equates to less people catching a ride, directly impacting Uber’s business. As headlines of the coronavirus’ spread increased since late February, the number of ridesharing trips began to significantly decline in the US. It is becoming clear, FY20 ridesharing gross bookings will clearly be down versus those recorded in FY19.
Although unlike its main rival Lyft, Uber can counter the impact on its ride sharing business with Uber Eats. In a recent conference call with investors, CEO Dara Khosrowshahi said that in addition to enough near-term liquidity, demand for Uber Eats since the outbreak has surged.
Fitzgerald believes Uber “should live to see the day.” The 5-star analyst added, “We think Uber’s value remains tied to growth trends that will play out long after coronavirus-driven disruptions have subsided: (1) smartphone penetration (forecast ~231MM US users base by 2028), and (2) riders should continue to shift spend from personal car ownership to ridesharing.”
Overall, what does the Street have in mind for Uber? 26 Buys and 3 Holds coalesce into a Strong Buy consensus rating. The average price target is $45.81, and could provide upside in the shape of a mercurial 99%, should the target be reached over the coming months. (See UBER stock analysis on TipRanks)