UBER stock is still a buy, Roth says

Following the company’s third quarter results, Roth MKM analyst Rohit Kulkarni, remains bullish on Uber (Uber Stock Quote, Chart, News, Analysts, Financials NYSE:UBER).

On November 7, Uber reported its Q3, 2023 results. The company posted Adjusted EBITDA of $1.1-billion on revenue of $9.3-billion, a topline that was up 11 per cent over the same period last year.

“Our relentless focus on improving the product experience for both consumers and drivers continued to power profitable growth, with trip growth accelerating to 25%,” said CEO Dara Khosrowshahi. “Uber’s core business is stronger than ever as we enter the busiest period of the year.”

Kulkarni says some investors are focused on the wrong aspects of the results.

“Uber reported a clean beat and raise quarter with 3Q and 4Q outlook for Gross Bookings and EBITDA coming above expectations. Revenue miss implies negative optics, however, creates noise and buying opportunity, in our opinion. Oct trends hint at continued strength across both segments. With 15mn paying subscribers and growing advertising adoption, Uber has just started to flex its platform muscle.”

In a research update to clients November 7, the analyst maintained his “Buy” rating and one-year price target of $61.00 on Uber.

Kulkarni thinks Uber will post EPS of $0.58 on revenue of $37.9-billion in fiscal 2023. He expects those numbers will improve to EPS of $1.34 on a topline of $44.6-billion the following year.

“At the time of publishing this research report (7:45am ET), Uber shares indicated +1 pre-market to approx. $48.10. Uber’s shares are up nearly ~90% YTD vs. the S&P 500 +14%. We expect these gains to hold over the near term, and we would be incremental buyers on strength. As a quick valuation thought exercise, we see a realistic scenario of >$5.5bn FCF in 2024 emerging as consensus vs. the Street at $5.1bn currently. Assuming 5% FCF implies >$115bn enterprise value or “mid-$50s” price,” the analyst concluded.