Uber could be one of the New Year’s top picks, analysts say
Despite losing investor confidence in the face of persistent headwinds from Covid, Uber could position itself for a comeback in 2022, analysts say.
“We believe this year will be different given the outlook for Adjusted EBITDA and our focus on food research despite the mobility uncertainty,” Needham analysts said in a note Friday. The company named the rideshare stock its top choice for 2022, although it lowered its price target to $ 75 per share from $ 77 per share.
Uber said in its fourth quarter that it expects Adjusted EBITDA of $ 25 million to $ 75 million, which will be its second quarter of profitability. CEO Dara Khosrowshahi told Bloomberg last month that he expects the company to be near the high end of this forecast.
“After Covid we are an all weather business and believe we can be successful and truly grow in any environment,” Khosrowshahi said, adding that he was “confident” the business will reach historic highs in 2022.
Jefferies analysts also said on Friday they saw an accelerated path to profits by “reaping the benefits of the hard work of rationalizing the portfolio over the past few years + by achieving scale in mobility and delivery.”
Several factors have led a handful of analysts to name the ridesharing stock, which lost nearly 18% in 2021, among their top picks for the new year.
Delivery will continue to increase
The company has invested heavily in its grocery, beverage and convenience delivery segment since the start of the pandemic. It acquired the Drizly liquor delivery service last February. After talks to acquire GrubHub food delivery service failed, Uber acquired Postmates.
Concentrating its acquisition efforts on its Eats segment during the pandemic has allowed the company to retain some of its business despite reduced travel. It will also continue to propel the stock forward, investors believe. Needham, optimistic about the delivery, said 2022 “could be the year of the grocery store.”
“We expect Uber to announce additional partnerships and geographic expansions in its grocery delivery in 2022, and view these potential developments as bullish,” analysts said.
Mobility is back
Several analysts expect the mobility segment to continue to improve over the coming year.
“Omicron setting headwinds aside, we believe UBER is uniquely positioned to benefit from a presumed and more complete reopening in 2022 with particularly strong exposure to air and business travel, which should lead to a downturn in rates. gross reservation of Mobility as well as the segment level of Mobility. profitability, ”RBC Capital Markets analysts said Thursday.
Jefferies analysts said they expect Uber’s mobility bookings to fully recover in 2022 compared to 2019.
This is also accompanied by an increase in the number of drivers. Uber has been grappling with imbalances between supply and demand due to the pandemic, which has resulted in soaring prices and increased wait times. Uber said the numbers continue to improve when it comes to attracting and retaining new drivers, but there is still room to grow.
Of course, its recovery could still be affected by new variants of the coronavirus or potential economic shutdowns. A tight labor market could also “strain the economy of ride-sharing units,” analysts at Wolfe Research said in a note Tuesday.
Regulation looms, but investors seem confident
Another key element in 2022 is the company’s regulatory environment.
“Since its IPO, a constant setback has been regulatory overshoot, particularly around the classification of drivers,” RBC analysts wrote Thursday. Lawmakers have pushed to reclassify concert workers as full-time employees, in a bid to secure things like minimum wages and benefits. But categorizing drivers as subcontractors allows companies to avoid the costly perks associated with full-time employment, such as unemployment insurance.
Gig economy companies, including Uber, won a temporary victory in 2020 in California, when voters approved Proposition 22 with a majority vote. This voting measure effectively exempted several odd-job businesses from the recently enacted state law, Assembly Bill 5, which sought to categorize their workers as full-time employees.
But it was a narrow victory last year when a California court ruled that Proposition 22 is unconstitutional because “it limits the power of a future legislature to define app-based drivers as workers subject to the law. compensation for industrial accidents “. This makes the whole ballot measure “inapplicable”.
A coalition representing the businesses said it planned to appeal, and investors appeared to ignore the news. Uber’s stock closed that day.
Now other states are following in California’s initial footsteps.
“We anticipate a positive regulatory resolution for the state-level workforce issues as NY and MA are likely to follow a similar follow-up to Proposition 22 in California,” Mizuho analysts said in a statement. Friday note. “In New York City, a pending bill that keeps concert workers as contract workers with the support of two major unions is about to be passed by the State Assembly after the recess. In Massachusetts, the ballot measure is expected to be voted on on election day this year. with strong support from the drivers. “
—Michael Bloom of CNBC contributed to the postponement.
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