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Uber Technologies (UBER) is a ride-hailing giant, whose shares have been under considerable pressure in recent months, thanks in part to a perfect storm of headwinds.
The stock finds itself down around 35% from its February 2021 all-time high of $64.05. (See UBER stock charts on TipRanks)
Despite its lofty losses, Uber stock looks like a very compelling contrarian candidate for those seeking value and growth in today's red-hot market. I am bullish on the stock.
Steering Towards Profitability
Many investors have been taking a raincheck on Uber -- and its top peer, Lyft (LYFT) -- because of a lack of profits, and a highly uncertain growth story. Some have criticized the company and the broader ride-hailing industry as having a broken business model.
Over the last three years, the company has averaged just 13% in sales growth. Pretty underwhelming, given the magnitude of Uber's recent quarterly losses.
Yet, it's a mistake to dismiss Uber as having a broken model just because of continued losses and underwhelming revenue.
With Uber Eats poised to make a move into the green over the near-to-medium-term, there are reasons to be optimistic over the firm's profitability going forward.
The company has also made moves that should make the transition more comfortable.
After selling its self-driving car business to Aurora, Uber will no longer be sinking considerable sums of cash into R&D. The ride-hailing giant will retain a $400-million stake in Aurora though, and if the startup's autonomous projects pay off, Uber will still benefit accordingly. Really, a win-win.
Next, Uber is exploring other initiatives that should add directly to its bottom line. The company recently announced its intention to get in on in-app advertising.
Undoubtedly, Uber is shaping up to be the one-stop shop for all your transportation needs. The ad business, while less meaningful over the near-term, could make the drive to profits that much smoother.
Finally, Uber Pass, Uber's subscription service for rides and delivery, could stabilize cash flows and bolster profits.
Wall Street's Take
UBER has a Strong Buy consensus on TipRanks. Out of 23 analyst ratings, there are 21 Buy and two Hold recommendations.
The average UBER price target of $68.59 implies 64.3% upside potential to current levels of trading.
Bottom Line on Uber Stock
Uber looks to be on the path towards profitable growth. Don't let recent cash bleed numbers cloud the long-term story, which still looks very much intact.
Undoubtedly, a lot needs to go right over the next 18 months for the stock to climb out of its rut. As management looks to improve upon its operating margins by taking advantage of further M&A opportunities, there will be no telling just how high the stock is capable of flying.
Uber stock has stalled out for now, but may just be a matter of time before it can put its foot to the gas.
Disclosure: On the date of publication, Joey Frenette had no position in any of the companies discussed in this article.
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