- UBS initiated coverage of Uber on Tuesday with a "buy" rating and a price target of $56.
- That's roughly 54% higher than where Uber shares traded at Monday's close.
- "Across its portfolio of businesses and assets, we see opportunities for market repair, long-tailed TAM and paths to unlock asset value," a team of UBS analysts led by Eric Sheridan wrote in a Tuesday note.
- Uber is down about 19% from its May IPO, but has 29 "buy" ratings from Wall Street analysts.
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Uber gained another bullish Wall Street analyst this week, despite trading down about 19% from its May initial public offering.
On Tuesday, UBS initiated coverage of Uber with a price target of $56, roughly 54% higher than where shares traded at Monday's close.
Shares of the company gained as much as 2.5% Tuesday.
"Across its portfolio of businesses and assets, we see opportunities for market repair, long-tailed TAM and paths to unlock asset value," a team of UBS analysts led by Eric Sheridan wrote in a Tuesday note.
Uber's collection of global businesses look "poised to scale into the next large cap multi-sided marketplace with improving economics and flywheel effects on both the supply and demand side," according to the note. UBS also sees that management is "committed to unlocking asset value and compelling risk versus reward."
The positive coverage of Uber's battered stock focuses on three pivotal questions about Uber's growth in ridesharing, Uber Eats, and its path to profitability, UBS wrote.
The first is Uber's main ridesharing business. "We expect Ridesharing bookings to grow at a 15% '19E-'24E compound annual growth rate with adjusted net revenue growing at a 17% compound annual growth rate" during the same period, according to the note.
This is because UBS believes Uber is "the clear #1 player in North America," and a top player in markets where it operates outside of North America, according to the note.
Second, UBS forecasts Uber Eats can grow its gross bookings at a 33% compound annual rate between now and 2024. Uber has a large opportunity in food delivery that it can capitalize on as a platform, Sheridan wrote, especially as consumer trends shift away from cooking.
And third, UBS thinks that Uber can expand its margins and turn a profit on an Ebitda basis by 2021. Profitability has been a top-of-mind issue for investors in Uber, and its unicorn-rival, Lyft, which went public just a few months before Uber did.
UBS expects that Uber's adjusted Ebitda will hit $43 million in 2021, up from a loss of $2.8 billion in 2019, according to the note. Further, UBS forecasts that Uber will achieve a roughly 14% adjusted Ebitda margin in its 2024 estimates.
Uber has a consensus price target of $45.28 and 29 "buy" ratings, 12 "hold" ratings, and zero "sell" ratings, according to Bloomberg data. The company is scheduled to report its fiscal fourth-quarter 2019 results on February 6.
Uber has gained 22% year-to-date through Monday's close.
