Uber Stock Price Up 6% Today – Time to Buy UBER Stock?

Uber (UBER) stock was trading almost 6% higher in US premarket price action today after releasing its fourth quarter. Rival ride-sharing company Lyft which had released its earnings a day before Uber also gained over 6% in yesterday’s price action.

While Lyft stock was trading lower in premarkets yesterday as markets were concerned about the lower-than-expected guidance for the first quarter, it eventually closed in the green.

Uber stock is down 37% from its 52-week highs and is in the deep bear market territory. What’s the forecast for the stock and is it a good buy in February 2022?

Uber stock recent developments

Uber reported revenues of $5.78 billion in the fourth quarter of 2021, which was ahead of the $5.34 billion that analysts were expecting. The company also posted its first profitable quarter and reported a net income of $892 million in the quarter. However, the profits came on the back of a $1.4 billion pre-tax income from equity investments. While it recorded unrealized gains on its investment in Grab and Aurora, it was somewhat offset by unrealized losses on the company’s investment in Didi. Uber is among the biggest stockholders of Didi whose stock has plunged after the company announced a delisting from the US exchanges.

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Uber’s earnings were better than expected

After adjusting for the one-time gain, the company reported an adjusted loss per share of $0.26. It was nonetheless better than the $0.35 per share loss that analysts were expecting. Uber reported an adjusted EBITDA of $86 million which was higher than its guidance. The company’s fast-growing delivery business also posted positive adjusted EBITDA in the quarter.

Operating metrics bounced back

Uber reported strong operating metrics in the fourth quarter of 2021. Its gross booking increased 51% to $25.9 billion and were higher than the company’s guidance. The mobility business reported gross bookings of $11.3 billion which was 67% higher than the corresponding quarter last year. The company’s gross delivery bookings increased 34% YoY to $13.4 billion.

Dara Khosrowshahi on the earnings

Expressing optimism over the performance, Uber’s CEO Dara Khosrowshahi said “Our results demonstrate just how far we’ve come since the beginning of the pandemic.” He added, “In Q4, more consumers were active on our platform than ever before, Delivery reached Adjusted EBITDA profitability, and Mobility Gross Bookings approached pre-pandemic levels. While the Omicron variant began to impact our business in late December, Mobility is already starting to bounce back, with Gross Bookings up 25% month-on-month in the most recent week.”

Uber provided guidance

Uber also provided the guidance for the first quarter and said that it expects gross bookings to be between $25-$26 billion. It expects to post adjusted EBITDA of $100-$130 million in the quarter. The company’s guidance implies a sequential increase in both gross bookings and EBITDA. Lyft’s guidance was quite tepid and the company expects volumes to drop in the first quarter. The anomaly is due to the business model as Uber also has food delivery operations which have been strong despite the omicron wave. In the fourth quarter, the company generated revenues of $2.42 billion from the delivery business which was even higher than the $2.28 billion that its ride-hailing business generated.

The company is now trying to balance growth with profitability. In the prepared remarks its CFO Nelson Chai said, “Moving forward, we are poised to continue to grow at scale while expanding profitability.” As part of its efforts to work on profitability, the company has exited several loss-making markets. It sold the autonomous driving business to Aurora and the flying taxi business to Joby Aviation.

Uber stock forecast

Uber’s diversified business model is among the reasons analysts are bullish on the stock. While rising coronavirus cases lead to a drop in its ride-hailing business, they get offset by the increase in delivery revenues. Online food ordering has as much become a part of life as ride-hailing. Needham and Jefferies are among the brokerages that prefer Uber over Lyft.

Of the 46 analysts covering Uber stock, 41 have a buy rating while five have a hold rating. None of the analysts has a sell rating. Its median target price of $68 is a premium of 69.3% while the street low target price of $82 is a premium of 104%. The stock even trades 20% below its street low target price of $48.

Target price revision

After Uber’s earnings release, analysts might revise their target prices. Earlier this week, RBC reiterated its buy rating on the stock ahead of the investor day. It said, “We see the analyst day as a positive catalyst: (1) laying out updated LT margin targets (higher on mobility and on the core food delivery portion of the Delivery segment), (2) showing a path to faster mobility bookings growth in 2023 versus 2019, through new formats and geographical unlocks.”

Analysts are bullish ahead of the investor day

Bank of America is also bullish on Uber stock ahead of its investor day. Oppenheimer also sees investor day as a positive catalyst for the stock. In its note, it said, “We believe investors are on the sidelines waiting for Mobility recovery, while concerned about Delivery fall-off and increased competition. With UBER hosting its first investor day since the IPO, we expect it to provide an updated five-year outlook and address many of the overhanging concerns around competition/regulation.”

Should you buy Uber stock?

Uber trades at an NTM (next-12 months) EV-to-sales multiple of just about 3.5x. As the company works towards achieving sustainable profitability while maintaining a reasonable level of growth, it should see a rerating. Its diversified business model makes it a good play amid the COVID-19 pandemic.

The stock has crossed above the 50-day SMA (simple moving average) which is a bullish indicator. However, it still trades below the 100-day and 200-day SMA. As the omicron wave subsides in the US and other countries, Uber’s ride-hailing business should see much better days ahead.

At these prices, Uber is among the best stocks to buy for 2022. Needham had listed the stock as its top pick for 2022. While Uber, like fellow gig economy companies, faces regulatory hurdles, its valuations look quite tempting at these price levels.

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