San Francisco, CA-based ride-sharing company Uber Technologies UBER has been having a great run on the bourses lately. In the last three trading sessions, the stock hovered at more than $82/share, closing at $83.2 on Tuesday. That’s not very far from its all-time high of $87, hit on Friday.
Here’s What Propelled UBER Stock to an All-Time High
Uber shares gained 10.8% on Oct. 11 following Tesla’s TSLA not-so-exciting robotaxi event, which failed to meet expectations. Tesla’s much-anticipated unveiling of robotaxi lacked some crucial details about the potential ridesharing app. A robotaxi is a self-driving car that operates as a taxi in an e-hailing service and passengers can request it via a smartphone application.
Shares of another ride-sharing company Lyft LYFT also jumped following TSLA’s disappointing event, which led investors to believe that the Tesla threat wasn't as imminent as expected. The advent of a new technology that renders drivers irrelevant would no doubt impact ride-sharing companies. No wonder, the underwhelming Robotaxi event of TSLA propelled Uber shares to an all-time high.
Uber had suspended its autonomous vehicles or AV program in Arizona in 2018 after a pedestrian fatality. Since then, Uber has revamped its AV strategy, partnering with the likes of Alphabet's GOOGL Waymo. Uber also recently entered into a partnership with General Motors’ GM Cruise to bring Cruise autonomous vehicles to the Uber platform. Earlier this month, Uber announced a multiyear strategic partnership with Avride, an AV start-up in Austin, TX, as part of its strategy to neutralize threats from other AV-focused companies.
In fact, Uber shares have performed exceedingly well this year, outperforming its industry and the coveted S&P 500 index, which Uber joined in December 2023.
YTD Price Performance
Image Source: Zacks Investment Research
Uber shares are trading well above the 50-day and 200-day moving averages, indicating a bullish trend.
Image Source: Zacks Investment Research
Favorable Earnings Estimate Revisions for Uber
The company, which provides ride-hailing, food delivery and freight (leasing vehicles to third parties) services through its Mobility, Delivery and Freight segments, surpassed the Zacks Consensus Estimate in two of the trailing four quarters (missing the mark on the other two occasions), with the average earnings surprise being 29%. Uber is also witnessing northbound estimate revisions for 2024 and 2025.
Image Source: Zacks Investment Research
Further Reasons Why We Are Bullish on Uber
Commendable Expansion Efforts: Even though Uber’s primary business is ride-sharing, it has diversified into food delivery and freight over time. Diversification is imperative for big companies to reduce risks and UBER has excelled in this area. It has engaged in numerous strategic acquisitions, geographic and product diversifications and innovations. Uber’s endeavors to expand into international markets are commendable and provide it with the benefits of geographical diversification. Prudent investments enable Uber to extend services and solidify its comprehensive offerings.
Cost-Containment Efforts: Uber’s focus on disciplined spending and cost-cutting measures also bodes well for bottom-line growth. The company’s long-term (3-5 years) earnings growth rate is an impressive 53.2%, higher than its industry’s 24.8%.
Key Segments Performing Well: Uber’s ride-sharing as well as delivery platforms are growing in popularity. This is generating strong demand, which, along with new growth initiatives and continued cost discipline, are driving the company’s results. In the last reported quarter, total gross bookings increased 19% year over year to $40 billion, with trips soaring 21% to 2.8 billion. Gross bookings are likely to remain strong in the third quarter of 2024 as well. For the third quarter of 2024, Uber expects gross bookings in the range of $40.25 billion to $41.75 billion, which reflects year-over-year growth in the 18-23% band.
We expect gross bookings from the Mobility segment in the September quarter to grow 21% on a year-over-year basis. We expect gross bookings from the Delivery segment in the September quarter to grow 14.6% on a year-over-year basis. Total trips are expected to soar 22.7% year over year in the September quarter, per our model.
Robust Share Buyback: Uber exited the second quarter of 2024 with an operating cash flow of $1.8 billion, up 53% year over year. Free cash flow (net cash flows from operating activities less capital expenditures) came in at $1.7 billion, up 51%. Driven by the strength in its cash flows, the company started repurchasing shares for the first time, with its board authorizing up to $7 billion in share repurchases earlier this year.
Ride UBER Stock for Higher Highs
The consensus price target for UBER stock is $88.48 per share, indicating a potential upside of over 4% from the current levels. Despite the stock trading near its all-time high, it's still an opportune time to buy UBER, thanks to the numerous tailwinds driving the stock as highlighted in the write-up apart from the positive estimate revisions. The Zacks Consensus Estimate for 2024 implies a 16.5% year-over-year increase in sales and a 24.1% rise in EPS, signaling strong growth potential ahead.
UBER stock carries a Zacks Rank #2 (Buy) and has a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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