UBER wins big price target raise at Roth

Following the announcement of a significant share buyback, Roth MKM analyst Rohit Kulkarni has raised his price target on Uber Technologies (Uber Technologies Stock Quote, Chart, News, Analysts, Financials NYSE:UBER).

On February 14, before the company’s virtual investor day, Uber announced a share buyback of up to $7-billion.

“Today’s authorization of our first-ever share repurchase program is a vote of confidence in the company’s strong financial momentum,” said CFO Prashanth Mahendra-Rajah. “We will be thoughtful as it relates to the pace of our buyback, beginning with actions that partially offset stock-based compensation, and working towards a consistent reduction in share count.”

Kulkarni says the size of the buyback surprised the street.

“Uber’s shares were up +15% yesterday (vs. S&P 500 +1.0%) on surprisingly large buyback authorization announcement ($7bn) coupled with above consensus 3-year outlook for Gross Bookings, EBITDA, and FCF. Uber mgmt. laid out a compelling investment case for Uber to become a “must own” Internet/Tech asset among growth investors as its marketplace network effects have hit scale benefits resulting in serial compounding. Our 2024 estimates unchanged, however, 2025 estimates grind higher,” he wrote.

In a research update to clients February 15, Kulkarni maintained his “Buy” rating on UBER, but raised his price target on the stock from $79.00 to $91.00.

The analyst thinks UBER will post EPS of $1.31 on revenue of $43.1-billion in fiscal 2024. He expects those numbers will improve to EPS of $2.11 on a topline of $49.9-billion in fiscal 2025.

“Based on ’24x ’24E EBITDA. Our upside scenario math implies >$225bn in bookings, >$11bn in EBITDA, >$10bn in FCF vs. the Street at $207bn, $10.2bn, $9.5bn, respectively,” the analyst explained. “And, applying a 25.0x EV/FCF multiple or 4.0% FCF yield results in >$250bn market cap, or >$115 share price.”