Following mixed earnings and continued stop-and-go trading congestion in Uber (NYSE:UBER) stock, the decision is simple. UBER stock bulls and bears should wait curbside until the UBER price chart confirms it’s time to hail a ride. Let me explain.
Uber’s quarterly results last week offered a bit of something for cynics and optimists alike. It also offered investors a reason to step to the side and remain neutral in Uber stock.
Promoting the more bearish or cautious case against Uber stock, an already bearish Susquehanna, which maintains a neutral rating and $42 price target on shares, was surprised management failed to provide guidance despite calling the ride-share market increasingly competitive and rational.
Furthermore, the firm reiterated Uber’s “business complexity, as well as the company’s lack of visibility into forward numbers and precarious competitive landscape” as issues backing their view on UBER stock.
In the other camp, investment house Wedbush stated earnings mark a bullish “big first step” for Uber. Wedbush has maintained its contrasting view since the Uber IPO roadshow when it initiated coverage of shares with an outperform rating and price target of $65.
By Wedbush’s account, Uber is a transformational company in the spirit of Apple (NASDAQ:AAPL) or Amazon (NASDAQ:AMZN). Those words were from early May. And the latest information appears to have only reinforced this view. The firm believes Uber’s ride-hailing loyalty program, food delivery service, improving “take rates” and contribution margins are paving the way for a stronger-than-feared second half in 2019.
So, who are you going to believe in Uber stock? Maybe J.P. Morgan has it right?
J.P. Morgan sees Uber’s report as having positive read-throughs for the smaller, but fierce competitor Lyft (NASDAQ:LYFT). And LYFT stock did trade higher by more than 5% on Friday compared to Uber stock’s gain of just 1.53%.
At the end of the day though, continuing to wait on a bit more price confirmation on the UBER stock chart still makes the most sense.
Uber Stock Price Chart
Click to Enlarge
Since last writing about Uber stock a handful of days in front of earnings, shares have freed themselves from a symmetrical triangle pattern. But my view, like Susquehanna’s and Wedbush’s remains the same. I’m still neutral on Uber.
I’d recommend bears and bulls wait for a continuation move out of the neutral congestion formation. Previously, I advised using $42.50 to go long shares of UBER and a move below $39 to go short. In our estimation, both still look good for acting on. Each entry allows Uber stock to build some trend momentum firmly out of the price pattern, while avoiding today’s modestly bearish chop near the pattern’s apex.
Ultimately, if push came to shove, I’d say the bears have an edge since pattern support has been broken. But since Friday’s hammer candlestick is parked squarely between potentially very bullish and bearish traffic areas, I’m more appreciative of a larger move in either direction once Uber stock’s congestion is cleared.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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