Uber Stock Up 13% in December – Time to Buy UBER Stock?

The price of Uber stock is surging 13% so far this month following a wave of positive news and rumors including the potential sale of the company’s stake in Didi Global.

Reuters reported chatter about this potential divestiture back on 15 December after the Chief Executive Officer of the ride-hailing business, Dara Khrosrowshahi, deemed these and other similar investments as “non-strategic” for the firm.

These rumors come only a few days after Didi Chuxing moved to delist its shares from the New York Stock Exchange following multiple aggressive regulatory measures adopted by the Chinese government to protect the sensitive data that is processed by Didi.

Back in September, Uber valued its stake at Didi at $4.13 billion. However, the valuation could be much lower now considering the significant decline that Didi shares experienced after the delisting.

Meanwhile, on 16 December, Uber and Motional – a company that provides robotaxi services – announced that they were partnering to offer autonomous deliveries. Santa Monica will be the first location in which this service will be available. The program will be launched in early 2022.

Investors were excited by the news as shares of Uber surged nearly 6% during the stock trading session that followed the announcement.

What can be expected from Uber stock in light of these developments? In this article, I’ll be assessing the price action and fundamentals of this tech stock to outline plausible scenarios for the future.

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Uber Stock – Technical Analysis

Back in November when I last wrote about Uber, I highlighted that the $40 support area would play a major role in shaping the price action for this stock in the weeks to come.

Everything back then pointed to a bearish outlook but the decline that came after was quite mild as the stock went on to lose 8% or so in the following days, finding a bottom at around $35 per share.

Positive news on the virus front including the milder severity of the omicron variant compared to its predecessor have helped the price of Uber stock in bouncing from these lows as the market continues to expect that economies around the world will remain open for business and will eventually find their path toward normalcy and growth in 2022.

Right now, the price of Uber stock is heading to tag the upper bound of the downward price channel highlighted in the chart above. That resistance, which stands at around $47 per share, will be quite close to the 200-day simple moving average and this means that this is a relevant area of resistance to watch.

A move above these two markers could signal the beginning of a sustained rally. A move to the $50 level would confirm this bullish outlook and a first target if that happens could be set at $60 per share for Uber in the medium term.

Momentum indicators are favoring this view as the Relative Strength Index (RSI) is standing at 58 (bullish) while the MACD has moved to positive territory days after making a cross above the signal line. Moreover, positive histogram readings have been steadily increasing.

All things considered, the outlook for Uber stock is bullish as long as the price moves above the $50 threshold.

Uber Stock – Fundamental Analysis

On 22 December, JP Morgan revealed its top picks within the tech sector for 2022. The American investment bank selected Uber Technologies as one of its candidates, citing “an overall more favorable operating environment”.

Analysts at the investment bank stated that they preferred companies with “strong profitability and reasonable valuation” in light of seemingly imminent interest rate hikes next year.

Even though Uber is not a profitable endeavor, its valuation multiples have declined significantly during the latest weakness that growth stocks as a while have experienced amid expectations of a change in macroeconomic conditions.

Based on 2022 forecasts, the company is trading at just 3 times its sales. This is 4 points lower than the 7x multiple exhibited by the stock back in April this year when it was trading at around $60 per share.

Even though Uber still has much to prove on the financial front as it continues to report negative profitability and free cash flows, the highly disruptive nature of its business model makes it an interesting candidate for a long-term investment for those who believe that the company could become a dominant force of the tech space in the future.

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