Uber (UBER) stock is starting to pick up traction, now up around 23% from its September 15 bottom. The popular ride-hailing and food-delivery firm faced a tough road amid COVID-19 headwinds.
Now that the economy is ready to reopen, lingering COVID-19 disruptions are still keeping the firm from blasting past pre-pandemic ridership levels.
However, after posting a solid third quarter that revealed an operating profit alongside signs of easing driver shortages, it seems like UBER stock is ready to put COVID-19 headwinds behind it, as it looks to U-turn off its recent bottom. As such, I am bullish on the stock, as the stage looks set for a very nice recovery over the next 18 months. (See Analysts’ Top Stocks on TipRanks)
COVID-19 Headwinds Could Persist, but Uber Seems Underpriced
Undoubtedly, there was underwhelming demand for ride-hailing services (but upped demand for food delivery) during COVID-19-induced lockdowns over the past year and a half. With a promising Pfizer (PFE) oral treatment on the way, it seems like the worst of the pandemic may already be in the rear-view mirror, decreasing the odds of further lockdowns.
Although demand for ride-hailing has picked up, a lack of supply as a result of labor issues has caused hefty price increases. Indeed, demand issues turned into supply issues relatively quickly.
Nobody knows how long it will take for supply and demand to reach equilibrium. Still, evidence of a turning tide was apparent in the latest quarter.
Uber stock looks to be worth getting behind now that most of the negatives have already been baked in, with signs of normalizing conditions. Despite promising metrics that point to an easing of driver shortages, it's important to remember that the pandemic still isn't over. As such, uncertainties remain high even though it seems like a move into endemic seems as closer as ever.
It's tough to tell what lies in the road ahead. In spite of this, Uber stock seems very attractively valued and represents an intriguing reopening play for those with a long-term investment horizon. Furthermore, The company's upbeat outlook is nothing short of encouraging and represents a significant vote of confidence for Uber's recovery prospects.
Doing Well Despite Headwinds
Uber has done a relatively decent job of playing the tough hand it was dealt. There's only so much the company can do about COVID-19-induced disruptions. It has done the best to its ability, though.
The company managed to post a modest operating profit alongside a relatively decent $4.85 billion in revenue for the fourth quarter. The push into EBITDA profitability amid profound COVID-19 headwinds enticed some analysts to hike their price targets on the name.
Wall Street's Take
Turning to Wall Street, the consensus rating for UBER stock comes in as a Strong Buy. Out of 20 analyst ratings, there are 19 Buys and 1 Hold rating.
As for price targets, the average Uber price target of $69.75 implies 49% upside potential. Analyst price targets range from a low of $50 per share to a high of $82 per share.
Analysts are likely right to be bullish, as the company posted a hint of resilience through a challenging third quarter.
Uber Ready to Grow in the Post-COVID-19 Environment
As the network slowly returns to normal, Uber has the means to continue a sustained push further into profitability. Undoubtedly, Uber made the most out of a bad situation, winning a lot of business in its more pandemic-resilient Uber Eats platform.
On the other side of this pandemic, Uber could add to its food delivery strengths, while enjoying a continued recovery in ride-hailing. Moreover, many consumers who made ordering on Uber Eats a habit during the pandemic may be more enticed to subscribe to the firm's Uber Pass offering.
Undoubtedly, Uber is on its way to evolving into a one-stop-shop transportation super app. If the company can push into an operating profit amid profound headwinds, just think of what it's capable of in a normalized environment.
Uber's managers have done an excellent job of navigating out of the gutter this year. The stock looks absurdly cheap at 6.9 times sales, especially given its growth prospects coming out of the COVID-19 crisis. Could Uber be a timely near-50% gain, as some analysts believe could be in the cards? I wouldn't rule it out.
Disclosure: Joey Frenette doesn't own shares of any mentioned companies at the time of publication.
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