Uber Technologies get target raised by Roth

Uber Technologies (Uber Technologies Stock Quote, Charts, News, Analysts, Financials NYSE:UBER) has traded higher over the past couple of days as the market reacts to the latest earnings report from the ride hailing and delivery company. But there should be more upside to come, according to Roth Capital Partners analyst Rohit Kulkarni, who kept a “Buy” rating on the stock and raised his target price in a Wednesday report to clients. 

Uber reported its first quarter 2023 financials on Tuesday, coming in with gross bookings up 19 per cent year-over-year to $31.4 billion and revenue up 29 per cent to $8.8 billion. Adjusted EBITDA for the Q1 was $761 million compared to $168 million a year earlier. The consensus estimates were for a topline of $8.70 billion and EBITDA of $761 million. (All figures in US dollars.)

Uber said it expects the second quarter to see gross bookings rise to $33.0-$34.0 billion and adjusted EBITDA increase to $800-$850 million.

“We significantly accelerated Q1 trip growth to 24 per cent from 19 per cent last quarter, with Mobility trip growth of 32 per cent as a result of improved earner and consumer engagement,” said Dara Khosrowshahi, CEO. “Looking ahead, we are focused on extending our product, scale and platform advantages to sustain market-leading top and bottom-line growth beyond 2023.”

UBER shares reached a high of $60 in early 2021 but have lost ground in the interim and have been trading mostly in the $25-$35 range for 2023 so far. 

Kulkarni nudged his target higher, from $45 to $46 per share, which at press time represented a projected one-year return of 26 per cent.

“Uber shares closed +11.5 per cent [on Tuesday] (versus S&P 500 -1.2 per cent) as the company reported a ‘beat and raise’ earnings result with upside to underlying metrics highlighting fundamental strength across the board,” Kulkarni wrote.

“Uber is the only large-cap internet stock with clear and consistent upward revisions for 2023 and 2024 consensus estimates. Despite +45 per cent year-to-date performance versus S&P +8 per cent, Uber remains our top Long idea for the rest of 2023 (along with AMZN–Buy, $130 PT),” he said.

In comparison, Kulkarni said at its current share price Uber is trading at about 15.5x his revised 2024 EV/EBITDA estimate compared to Door Dash which is currently trading at 23.5x. 

Kulkarni pointed to a number of positives about Uber, including that Uber One subscribers accounted for about 27 per cent of Gross Bookings in the Q1 and adoption in the US and Canada has reached all-time highs and that new rider cohorts are spending and engaging more on the platform, with the 2022 cohort averaging 5.7x trips per month.

“We have greater conviction in upward bias in Uber’s estimates, and see a clear pathway to >$4 billion in free cash flow in ’24. As a quick valuation thought exercise, assuming five per cent implied yield on $4 billion ’24 free cash flow, we arrive at >$80 billion market cap or a “mid-$40s” price,” he said.